Chesapeake falls after earnings report; Mallinckrodt mixed on earnings, exchange offers

By James McCandless

San Antonio, Nov. 5 – A new batch of names releasing earnings over the last 24 hours were the driving force of Tuesday activity in the distressed debt market.

Chesapeake Energy Corp.’s notes fell after reporting a loss for the third quarter and raising worries about its ability to exist as a going concern.

Sector peer McDermott International, Inc.’s issues also declined after the release of its third-quarter earnings and announcing a leadership change.

Despite gains in oil futures, California Resources Corp.’s and Antero Resources Corp.’s paper was under pressure.

In the pharma space, Mallinckrodt plc’s notes varied after reporting positive earnings and exchange offers for two series of notes.

Meanwhile, Endo International plc’s issues also diverged upon its earnings release and an executive change.

Chemicals name Chemours Co.’s paper was lifted after beating analyst expectations in its earnings report.

Rayonier Advanced Materials Inc., another chemicals name, saw its notes slide after disappointing quarterly results.

In utilities, PG&E Corp.’s issues trended upward.

Chesapeake falls

Chesapeake Energy’s notes fell during Tuesday’s session, traders said.

The 8% senior notes due 2027 dropped 7¼ points to close at 60¼ bid. The 8% senior notes due 2025 lost 6 points to close at 64 bid.

The two tranches combined to see about $66 million trading.

On Tuesday morning, the Oklahoma City-based independent oil and gas producer was one of the many high-profile names to issue its earnings report in the last day.

The company reported a loss of 11 cents per share, slightly worse than the 10 cents per share loss that analysts were expecting.

Revenues were shown to be $1.17 billion.

Accompanying the report was a warning from the company that its continued operation as a going concern is at risk if low energy prices persist.

“If prices stay low, they won’t be able to meet their debt covenants,” a trader said. “So they either amend those or restructure at some point.”

McDermott down

Sector peer McDermott’s issues were also in decline, market sources said.

The 10 5/8% senior notes due 2024 shed 1¾ points to close at 11¾ bid.

About $32 million of the notes ended up on the tape.

The Houston-based oil and gas engineering name reported earnings late Monday, showing a $1.80 per share loss and revenues of $2.12 billion.

Both indicators were wider than analyst predictions.

The company also announced the immediate resignation of chief financial officer Stuart Spence, replacing him with former chief accounting officer Chris Krummel.

Oil names off

While oil futures improved, distressed energy tranches were under pressure, traders said.

West Texas Intermediate crude oil futures for December delivery rose 69 cents to settle at $57.23 per barrel.

North Sea Brent crude oil futures for January delivery finished at $62.96 per barrel after an 83 cent pickup.

Despite the positivity, Los Angeles-based producer California Resources’ paper moved downward.

The 6% senior notes lost 2 points to close at 27 bid. The 8% senior secured paper due 2022 also gave back 2 points to close at 41¾ bid.

Denver-based peer Antero Resources’ notes shifted lower.

The 5 1/8% senior notes due 2022 slipped 2 points to close at 82½ bid. The 5 5/8% senior notes due 2023 fell 1 point to close at 76¾ bid.

Mallinckrodt varies

In the pharma space, Mallinckrodt’s issues varied, market sources said.

The 5¾% senior notes due 2022 dived 6 points to close at 34 bid. The 4 7/8% senior notes due 2020 picked up 3 points to close at 69 bid.

The Staines-upon-Thames, England-based drug producer joined other names in releasing its third-quarter earnings report on Tuesday morning.

The company reported a $2.07 per share profit, outpacing analyst expectations for a $1.98 per share profit.

Revenues missed the mark at $743.7 million.

Concurrently, subsidiaries Mallinckrodt International Finance SA and Mallinckrodt CB launched private offers to exchange several series of their notes for up to $355 million of new notes, Prospect News reported.

The companies are offering to exchange any and all of the 4 7/8% senior notes due 2020 for new 10% second-lien senior secured notes due 2025; and the 5¾% senior notes due 2022, 4¾% senior notes due 2023, 5 5/8% senior notes due 2023 and 5½% senior notes due 2025 for up to $355 million of the new notes.

Endo diverges

Endo, another drug name, saw its paper diverge, traders said.

The 5 3/8% senior notes due 2023 added ¼ point to close at 63¼ bid. The 6% senior notes due 2023 shaved off ¼ point to close at 66½ bid.

The Dublin-based generic drug maker beat analyst expectations with a profit of 60 cents per share and $729.4 million in revenue.

“While that looks good at first glance, it’s a noticeable decline year over year,” a trader said.

The company also said that it was commencing a search for a new chief executive officer, with current CEO Paul Campanelli slated to retire after a replacement is found.

Chemours lifted

Elsewhere, in chemicals, Chemours’ notes were lifted higher, market sources said.

The 5 3/8% senior notes due 2027 improved by ¾ point to close at 90 bid.

Late Monday, the Wilmington, Del.-based chemicals producer saw a positive earnings release.

The company reported a third-quarter profit of 59 cents per share, just above the 56 cents per share profit that analysts had predicted.

Revenues were almost in line with targets at $1.39 billion.

Rayonier slides

Rayonier, another chemicals name, saw its issues slide, traders said.

The 5½% senior notes due 2024 dipped 4 points to close at 66 bid.

The rise in the Jacksonville, Fla.-based chemicals name’s structure came despite a third-quarter disappointment.

The company’s report was highlighted by a loss of 29 cents per share, wider than the 18 cents per share loss that analysts had come to in a consensus.

PG&E up

In utilities, PG&E’s paper moved on an upward trend, market sources said.

The 6.05% notes due 2034 gained 2 points to close at 106 bid. The 3.3% senior paper due 2027 improved by 1¼ points to close at 97¼ bid.

The San Francisco-based bankrupt electric utility is facing new questions concerning its potential role in recent wildfires in Northern California.

News broke on Monday that the company is facing billions of dollars in claims from state and federal agencies over firefighting costs from 2017 and 2018 wildfires.

The largest claim stands at $2.55 billion from the Federal Emergency Management Agency.

© 2015 Prospect News.
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