Mallinckrodt lower after ratings downgrade; oil names see boost from Saudi comments

By James McCandless

San Antonio, Sept. 9 – The new week in the distressed debt market started with trading centered on pharma and energy names.

Mallinckrodt plc’s notes moved lower after receiving a ratings downgrade amid continual pressure in the sector.

Sector peer Teva Pharmaceutical Industries Ltd.’s issues varied in trading direction during the session.

After a new Saudi energy minister’s comments on output, Antero Resources Corp.’s, Whiting Petroleum Corp.’s and Range Resources Corp.’s paper followed crude futures upward.

Utilities name PG&E Corp.’s notes trended higher as the company rejects bids for assets.

Dairy company Dean Foods Co.’s issues were better after announcing that it had completed its strategic review.

In telecom, CommScope Holding Co., Inc.’s paper declined after being downgraded.

Satellite operator Intelsat SA’s notes saw positivity.

Mallinckrodt lower

Mallinckrodt’s notes were seen moving lower on Monday, traders said.

The 5 5/8% senior notes due 2023 dropped 3 points to close at 32 bid. The 5½% senior notes due 2025 shaved off ½ point to close at 31 bid.

On Monday, Moody’s Investors Service downgraded Mallinckrodt International Finance SA, a subsidiary of the Staines-upon-Thames, England-based drug producer.

The agency lowered its corporate family rating, probability of default rating, speculative grade liquidity rating and issue-level ratings.

Moody’s cited the company’s weak liquidity, the risk of a distressed exchange and a continued exposure to opioid litigation.

Mallinckrodt announced on Friday that it had reached a $30 million settlement with two Ohio counties over opioid-related claims.

The company will pay Summit and Cuyahoga counties $24 million in cash and $6 million in donated generic products.

It is also considering a restructure, possibly via bankruptcy.

“I don’t know when, but I expect that they will file,” a trader said.

Petach Tikva, Israel-based sector peer Teva’s issues saw varying movements.

The 2.2% senior notes due 2021, while being pushed lower to 92 bid during the day, ended level at 93 bid. The 2.8% senior notes due 2023 dipped ½ point to close at 82 bid.

Oil names rise

As oil futures rose, distressed energy names followed suit, market sources said.

Futures were better after the new Saudi Arabian energy minister said that he would continue the country’s policy of helping prices by limiting crude oil output.

West Texas Intermediate crude oil futures for October delivery rose $1.33 to settle the day at $57.85 per barrel.

North Sea Brent crude oil futures for November delivery finished at $62.59 per barrel after a $1.05 gain.

Denver-based independent oil and gas producer Antero Resources’ paper moved up.

The 5 1/8% senior notes due 2022 gained ¾ point to close at 91 bid.

The notes saw $12 million on the tape by the close.

Denver-based oil and gas producer Whiting’s notes were also improving.

The 6¼% senior notes due 2023 shot up 2¾ points to close at 79¼ bid. The 6 5/8% senior notes due 2026 improved by 2½ points to close at 73¼ bid.

Fort Worth-based peer Range Resources’ issues followed the sector’s trend.

The 5% senior notes due 2023 added ½ point to close at 89½ bid.

PG&E higher

Utilities name PG&E’s paper trended higher, traders said.

The 6.05% bonds due 2034 shifted up ½ point to close at 109 bid.

On Friday, the San Francisco-based bankrupt electric utility announced that it had received and rejected a $2.5 billion offer from the city of San Francisco for the company’s electric equipment within the city.

The company said that it rejected the offer because it believed that it did not represent the best interests of its customers.

It also turned down a $116 million bid for assets in a central California irrigation district.

The company continues to maintain that it prefers an internal solution to its bankruptcy.

After the close on Monday, news broke that the company had filed its anticipated restructuring plan in bankruptcy court.

The plan calls for as much as $40 billion in debt and equity to cover liabilities stemming from wildfires and an emergence from bankruptcy next year.

Dean Foods better

Dairy name Dean Foods’ notes saw a better day, market sources said.

The 6½% senior notes due 2023 added 1¾ points to close at 44½ bid.

The Dallas-based dairy producer’s board of directors announced on Friday that it had concluded its strategic alternatives review.

The company concluded that it would not sell the company and instead execute its stand-alone operating plan under its new chief executive officer, Eric Beringause.

The review was undertaken six months ago after a series of disappointing quarters highlighted by falling milk sales.

CommScope off; Intelsat up

Telecom name CommScope’s issues were declining, traders said.

The 5% senior notes due 2027 shed ¼ point to close at 84¼ bid.

On Monday, Moody’s issued a downgrade for the Hickory, N.C.-based communications infrastructure name.

Citing a weaker-than-expected operating performance, the agency lowered the company’s corporate family rating, probability of default rating and issue-level ratings.

Luxembourg-based satellite provider Intelsat’s paper saw positivity.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 gained ½ point to close at 91½ bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes trended higher but closed level at 79 bid.

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