WeWork notes weaken as financial rescue deal reached; Rite Aid active amid upgrade

By James McCandless

San Antonio, Oct. 22 – Distressed debt trading focus on a handful of newsmakers on Tuesday, including WeWork Cos. Inc., which saw its notes decline after news broke that the company will be taken over by large backer SoftBank as part of a rescue deal.

In the retail space, Rite Aid Corp. saw some of its paper trade higher and other paper remain flat after the company received a ratings upgrade on Tuesday but remained firmly in distressed territory.

Sector peer J.C. Penney Co., Inc.’s notes declined.

Meanwhile, in energy, McDermott International, Inc.’s notes were negative again a day after the company announced $1.7 billion in new financing.

Despite a gain for crude futures, California Resources Corp.’s and Valaris plc’s issues diverged while Antero Resources Corp.’s paper dropped.

Elsewhere, in pharma, Teva Pharmaceutical Industries Ltd.’s notes improved while Mallinckrodt plc’s issues slid.

WeWork down

WeWork’s notes were seen moving negatively throughout Tuesday’s session, snapping a four-day rise, traders said.

The 7 7/8% senior notes due 2025 lost 1¼ points to close at 84¾ bid.

On Tuesday, news broke that the New York-based coworking company will accept a rescue package from its largest investor, SoftBank, which values the company at $8 billion.

As part of the package, former chief executive officer Adam Neumann will receive a $185 million consulting fee and sell about $1 billion of stock.

“I think they are finally recognizing that they can’t be just a startup anymore,” a trader said. “They’re going to have to spend a lot of time rebuilding their reputation.”

The company has seen intense negative pressure in recent weeks after an initial public offering plan pegged its value at $47 billion.

After the number was disputed, the IPO was shelved and Neumann resigned as CEO.

Rite Aid active

In the retail space, Rite Aid’s issues varied, market sources said.

The 6 1/8% senior notes due 2023 held level at 85 bid. The 7.7% senior debentures due 2027 added 2 points to close at 64½ bid.

The Camp Hill, Pa.-based drug store chain received an upgrade from S&P Global Ratings during the Tuesday session.

The agency raised its issuer credit rating to CCC+ from SD (selective default) though retained its recent ratings shift downward on its 2027 and 2028 notes to D.

S&P also said that Rite Aid’s capital structure is “unsustainable.”

Last week, the company received downgrades from S&P and Moody’s Investors Service, both asserting that recent cash tender offers were distressed exchanges.

Plano, Tex.-based department store chain J.C. Penny’s paper saw a decline.

The 5 7/8% senior secured paper due 2023 shaved off ½ point to close at 86¼ bid.

McDermott negative

Energy name McDermott’s notes saw negativity, traders said.

The 10 5/8% senior notes due 2024 dipped 2½ points to close at 21¾ bid.

The Houston-based oil and gas engineering company said on Monday that it reached an agreement with some of its secured lenders to provide up to $1.7 billion of additional financing.

The name will receive $650 million of financing comprised of $550 million under a term loan facility and $100 million under a letter-of-credit facility.

Oil names mixed

As oil futures gained, distressed energy tranches saw mixed movements, market sources said.

Futures were better after the nations of OPEC stated that they would look for ways to reduce output in the coming year.

West Texas Intermediate crude oil futures for November delivery added 85 cents to settle at $54.16 per barrel.

North Sea Brent crude oil futures for December delivery finished at $59.70 per barrel after a 74 cent rise.

Los Angeles-based independent oil and gas producer California Resources’ issues diverged.

The 6% senior notes due 2024 fell 1¾ points to close at 32 bid. The 8% senior secured notes due 2022 were level at 45½ bid.

London-based contract driller Valaris’ paper also differed in direction.

The 5.2% senior notes due 2025 shed 1¼ points to close at 55¼ bid. The 7¾% senior notes due 2026 gained 1¼ points to close at 58¼ bid.

Denver-based producer Antero’s notes dropped.

The 5 3/8% senior notes due 2021 declined by 1½ points to close at 89 bid. The 5 1/8% senior notes due 2022 slid 1¼ points to close at 79½ bid.

Teva up, Mallinckrodt off

Elsewhere, in pharmaceuticals, Teva’s issues improved, traders said.

The 3.15% senior notes due 2026 gained 1¾ points to close at 78¼ bid. The 2.2% senior notes due 2021 tacked on ¼ point to close at 95½ bid.

The Petach Tikva, Israel-based generic drug maker announced on Monday that it had reached a settlement with two Ohio counties over opioid-related claims just before a federal trial was set to begin.

The terms call for the company to pay out $20 million and donate $20 million in opioid addiction medication.

It concurrently announced that it had reached an agreement in principle on a blanket settlement against other litigation pending, agreeing to donate medicine it values at $23 billion over the next 10 years along with a cash payment of $250 million.

“It’s a win for holders and the company if that’s the final number,” a trader said. “The expectation has been that they would need to shill out a number in the high hundreds.”

Staines-upon-Thames, England-based peer Mallinckrodt’s paper slid during the session.

The 5¾% senior notes due 2022 lost 1¾ points to close at 39¼ bid. The 4 7/8% senior notes due 2020 shaved off ¾ point to close at 60 bid.

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