Mallinckrodt mixed on settlement news; PG&E better in run-up to restructuring plan

By James McCandless

San Antonio, Sept. 6 – At the end of the week, the distressed space was subdued with focus on the pharmaceuticals and utilities space.

Mallinckrodt plc’s notes varied in direction after the company announced a settlement with two Ohio counties over opioid-related claims.

Sector peer Endo International plc’s issues were positive on news that it had finalized a similar settlement agreement in Ohio.

Generics producer Teva Pharmaceutical Industries Ltd.’s paper also diverged.

Meanwhile, in utilities, PG&E Corp.’s notes performed better despite unfavorable developments from the California legislature.

In telecom, Digicel Group Ltd.’s debt issues improved after the company settled a dispute with the government of Antigua & Barbuda.

Satellite operator Intelsat SA’s paper was lifted during the day.

Although oil futures rose, Chesapeake Energy Corp.’s and California Resources Corp.’s notes saw mixed movements as Halcon Resources Corp.’s issues declined.

Mallinckrodt active

Mallinckrodt’s notes varied in direction in Friday’s session, traders said.

The 4 7/8% senior notes due 2020 added 4½ points to close at 62 bid. The 5¾% senior notes due 2022 lost 2¼ points to close at 36 bid.

The Staines-upon-Thames, England-based drug manufacturer announced that it had reached an agreement to pay two Ohio counties, Summit and Cuyahoga, $24 million in cash to settle lawsuits related to the opioid epidemic.

Once finalized, the settlement would resolve any lawsuits that are scheduled to go to trial in October.

As part of the agreement, the company will donate $6 million worth of generic products to the counties.

“It’s a question of how many settlements they can withstand,” a trader said.

Analysts have said that the industry could be made to collectively pay out hundreds of millions to billions of dollars in settlements across the country.

The name’s structure came under more pressure on Thursday after news broke that the company had hired restructuring advisers to explore restructuring options with bankruptcy on the table.

Endo heads higher

Sector peer Endo’s issues saw a positive day, market sources said.

The Par Pharmaceutical Cos. Inc. 7½% senior secured notes due 2027 gained 1 point to close at 92½ bid. The 6% senior notes due 2023 shot up 3¾ points to close at 64 bid.

On Friday, the Dublin-based generics producer said that it had finalized its previously announced $10 million settlement with Ohio’s Summit and Cuyahoga counties.

The agreement in principle was reached in August.

The company’s notes were dragged down with the rest of the pharma space on Thursday amid Mallinckrodt’s restructuring news.

Petach Tikva, Israel-based sector peer Teva’s paper also saw a divergence.

The 2.8% senior notes due 2023 shaved off ½ point to close at 82½ bid. The 2.2% senior paper due 2021 tacked on ¼ point to close at 93 bid.

PG&E better

Meanwhile, in utilities, PG&E’s notes took a better track, traders said.

The 6.05% notes due 2034 rose ¼ point to close at 108½ bid.

The San Francisco-based bankrupt electric utility was under pressure for most of the day but saw some relief in the afternoon despite unfavorable developments in the California legislature.

A bill that would have let the company use future profits to finance up to $20 billion in bonds dedicated to covering wildfire liabilities died before being considered.

The proposal may be considered again in January.

Opposing the measure was a group of creditors who claimed that it was a bailout for shareholders.

The company had lobbied the body to pass the bill in advance of its anticipated restructuring plan, which is expected to be filed in bankruptcy court next week.

Digicel, Intelsat lifted

In the telecom space, Digicel’s issues improved, market sources said.

The 6% senior notes due 2021 picked up 1¾ points to close at 66½ bid. The 6¾% senior notes due 2023 gained 4¼ points to close at 46¾ bid.

This week, the Bermuda-based mobile phone network provider resolved its ongoing dispute with the government of Antigua & Barbuda over the distribution of the country’s spectrum.

As part of the agreement, the company will return 2MHz in the 850MHz band and 9MHz in the 900MHz band in exchange for an extension of its operating licenses.

Previously, prime minister Gaston Browne had said that the government had the right to seize any part of spectrum it wanted for its government-run telecom, leading Digicel to get a court order preventing the potential action.

In June, Browne claimed that he had offered to buy a 51% stake in the name’s local operations, though executives denied that any conversations had taken place.

Luxembourg-based satellite operator Intelsat’s paper was lifted.

Intelsat Jackson Holdings SA’s 5½% senior paper due 2023 edged up ¼ point to close at 91 bid. Intelsat (Luxembourg) SA’s 8 1/8% senior paper due 2023 gained 1 point to close at 79 bid.

The company’s C-Band Alliance group was fractured this week with the departure of member Eutelsat.

Oil names mixed

As oil futures saw more gains to end the week, distressed energy tranches saw mixed movements, traders said.

Oklahoma City-based independent oil and gas producer Chesapeake Energy’s notes were not cohesive in direction.

The 8% senior notes due 2025 added ¼ point to close at 76¼ bid. The 8% senior notes due 2027 fell ½ point to close at 71 bid.

Los Angeles-based oil and gas producer California Resources’ issues were also varied.

The 6% senior notes due 2024 jumped up 4 points to close at 47 bid. The 8% notes due 2022 slipped ½ point to close at 53¾ bid.

Houston-based sector peer Halcon Resources’ paper declined.

The 6¾% senior paper due 2025 fell ½ point to close at 10 bid.

West Texas Intermediate crude oil futures for October delivery improved by 22 cents to finish the week at $56.52 per barrel.

North Sea Brent crude oil futures for November delivery closed at $61.54 per barrel after a 59 cent gain.

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