Mallinckrodt sinks on restructuring talk; Bed Bath better after announcing revamp plan

By James McCandless

San Antonio, Sept. 5 – The distressed debt market saw shifts in the pharma and retail sectors on Thursday.

Mallinckrodt plc’s notes sank after the news broke that the company has hired restructuring advisers in the face of increasing legal challenges.

Sector peers Endo International plc’s and Teva Pharmaceutical Industries Ltd.’s issues were also dragged lower.

In retail, Bed Bath & Beyond Inc.’s paper moved upward after the company announced a revitalization plan involving inventory reduction.

Department store name L Brands, Inc.’s notes saw a divergence.

Meanwhile, in energy, Whiting Petroleum Corp.’s issues made small gains with oil futures as Valaris plc’s paper saw mixed movements and California Resources Corp.’s notes fell.

Utilities name PG&E Corp.’s issues improved, snapping a negative streak.

Mallinckrodt sinks

Mallinckrodt’s notes sank, leading the pharma space lower, traders said.

The 5½% senior notes due 2025 crashed 10¾ points to close at 33¼ bid. The 4 7/8% senior notes due 2020 fell 3½ points to close at 57½ bid.

The two tranches combined to see about $71 million on the tape by the close.

Late Wednesday, news broke that the Staines-upon-Thames, England-based drug maker has hired Latham & Watkins and AlixPartners as restructuring advisers.

The company is exploring restructuring options and even bankruptcy protection.

Last week, the company’s securities were pushed lower after announcing that it had drawn down the remaining $95 million in its revolving credit facility.

“They have about $5 billion in debt and are getting sued left and right just like every other opioid name,” a trader said. “I would not be surprised if they filed by this time next week.”

In recent weeks across the country, other drug makers have been ordered to pay millions in settlements to governments over opioid-related claims.

The news dragged down the rest of the sector, like Dublin-based sector peer Endo’s issues.

The Par Pharmaceutical Cos. Inc.7½% senior secured notes due 2027 gave back 2 points to close at 91½ bid.

Petach Tikva, Israel-based generics producer Teva’s paper moved similarly.

The 6¾% senior notes due 2028 declined by 3¾ points to close at 83¼ bid. The 2.2% senior paper due 2021 dipped 1¼ points to close at 92¾ bid.

Bed Bath up

In retail, Bed Bath’s long-term notes moved upward on Thursday, market sources said.

The 5.165% senior notes due 2044 tacked on ¼ point to close at 70½ bid. The 4.915% senior notes due 2034 gained 1 point to finish at 75½ bid.

After the Wednesday close, the Union, N.J.-based retail company sent a letter to shareholders outlining its revitalization plan.

The company plans a “rapid refresh” of 160 of the company’s stores before the holiday shopping season, the closure of underperforming stores over the next few years and will begin an “aggressive reduction” of its inventory by $1 billion.

In recent months, the company has been under pressure from a group of activist investors to turnaround a sluggish business that culminated in the firing of its chief executive officer, the elimination of the position of chief operating officer and a 7% reduction in its corporate staff.

A new CEO is expected to be named soon.

Columbus, Ohio-based department store name L Brands’ issues diverged.

The 6¾% senior notes due 2036 added 1 point to close at 86½ bid. The 5¼% senior notes due 2028 held level at 91¾ bid.

Oil names vary

As oil futures saw slim gains, distressed energy names saw varying movements, traders said.

Denver-based independent oil and gas producer Whiting’s paper shifted upward.

The 6¼% senior notes due 2023 picked up ¼ point to close at 77 bid. The 6 5/8% senior notes due 2026 rose ¾ point to close at 71¼ bid.

London-based contract driller Valaris’ notes saw mixed movements.

The 5.2% senior notes due 2025 improved by 3¼ points to close at 60¾ bid. The 7¾% senior notes due closed level at 63 bid.

Los Angeles-based oil and gas producer California Resources’ issues saw negativity

The 8% notes due 2022 lost ¾ point to close at 54¼ bid.

West Texas Intermediate crude oil futures for November delivery improved by 4 cents to settle Thursday at $56.30 per barrel.

North Sea Brent crude oil futures for November delivery closed at $60.95 per barrel after a 25 cent shift up.

PG&E improves

Utilities name PG&E’s paper saw an improvement on Thursday, market sources said.

The 6.05% bonds due 2034 gained ¼ point to close at 108¼ bid.

As the day dwindled down, news broke that the San Francisco-based bankrupt electric utility is offering up a restructuring plan that would require more than $14 billion in equity commitments.

The company has seen some strife in bankruptcy court, where it was recently denied approval for key employee incentive plan.

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