Mallinckrodt gains despite federal probe; McDermott notes hit new low in energy space

By James McCandless

San Antonio, Nov. 26 – During Tuesday’s session, distressed debt trading turned to newsmakers in pharma and energy.

Mallinckrodt plc’s notes rose despite news on Tuesday that the federal government has opened a criminal investigation into several drug makers and distributors.

Sector peer Endo International plc’s issues also moved upward.

In the energy space, McDermott International, Inc.’s paper dropped to a new low following news of new board members with bankruptcy experience.

As oil futures pushed higher, California Resources Corp.’s and EnLink Midstream, LLC’s notes followed suit while Chesapeake Energy Corp.’s issues varied.

Elsewhere, in telecom, GTT Communications, Inc.’s paper was active but ultimately unchanged after announcing a potential divestiture.

Satellite operator Intelsat SA’s notes finished weaker.

Retailer L Brands, Inc.’s issues diverged in the aftermath of a ratings downgrade.

Mallinckrodt, Endo rise

Mallinckrodt’s notes rose despite adverse news, traders said.

The 4 7/8% senior notes due 2020 rose 2 points to close at 68¾ bid. The 5½% senior notes due 2025 picked up 1 point to close at 28 bid.

The gains for the Staines-upon-Thames, England-based drug producer came despite news out that the federal government has opened a criminal probe into whether it and other drug makers and distributors knowingly allowed opioids to flood the market, propagating an addiction epidemic.

Many names in the sector are already embroiled in litigation brought by thousands of cities and states from around the country with hopes that a blanket settlement is on the horizon.

“Some were thinking that the risk carried by all of this legal stuff was beginning to dissipate,” a trader said. “I think it’s too early to tell what effect the new probe has.”

The pharma space had seen positive news on Monday after news broke that generics names had reached a settlement with the Department of Justice over alleged price fixing.

Dublin-based sector peer Endo’s issues also moved upward.

The 6% senior notes due 2025 added ½ point to close at 62¼ bid. The 6% senior notes due 2023 gained 1½ points to close at 65½ bid.

McDermott drops

In the energy space, McDermott’s paper hit a new low, market sources said.

The 10 5/8% senior notes due 2024 dipped 1½ points to close at 6½ bid.

On Tuesday, the Houston-based oil and gas engineering company’s structure was pushed to its lowest point in distressed territory after the company announced that it had appointed two new board members with bankruptcy experience.

Recently, in a regulatory filing, the company disclosed that it had skipped an interest payment and had entered a 30-day grace period as it holds talks with creditors.

A string of underperforming quarters has increased scrutiny on the name, leading to its 10 5/8% paper falling from trading in the mid 90’s context in late July.

Oil trends up

Distressed energy names trended up with oil futures, traders said.

West Texas Intermediate crude oil futures for January delivery gained 40 cents to settle the day at $58.41 per barrel.

North Sea Brent crude oil futures for January delivery finished at $64.27 per barrel after a 62 cent boost.

Los Angeles-based independent oil and gas producer California Resources’ notes followed futures upward.

The 6% senior notes due 2024 garnered 2¼ points to close at 18¼ bid. The 8% senior secured notes due 2022 tacked on 1½ points to close at 26½ bid.

Dallas-based midstream name EnLink’s issues rose with the trend.

The 5 3/8% senior notes due 2029 added 2¾ points to close at 85¼ bid.

Oklahoma City-based oil and gas producer Chesapeake Energy’s paper was flat to lower.

The 8% senior notes due 2025 held level at 53½ bid. The 8% senior paper due 2027 shaved off ¾ point to close at 50 bid.

GTT flat; Intelsat weaker

Elsewhere, in telecom, GTT’s notes were active but finished flat, market sources said.

The 7 7/8% senior notes due 2024 ended level at 60¼ bid.

On Tuesday morning, the McLean, Va.-based cloud networking name announced that it hired Credit Suisse and Goldman Sachs as financial advisers to assist in the potential sale of its infrastructure division.

The segment includes fiber networks in Europe and across the Atlantic as well as data center infrastructure.

The company has been under pressure in recent weeks after posting a loss and missing revenue targets in the third quarter.

Luxembourg-based satellite operator Intelsat’s issues finished weaker.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 lost 1½ points to close at 46¾ bid. The 9½% senior notes due 2023 shed ½ point to close at 59 bid.

L Brands diverges

Retailer L Brands’ paper diverged in direction, traders said.

The 6¾% senior notes due 2036 dropped ¾ point to close at 86½ bid. The 6 7/8% senior paper due 2035 rose ¾ point to close at 88¼ bid.

The Columbus, Ohio-based department store chain has seen increased scrutiny in the last week after a third-quarter earnings report showed a net positive performance for the company overall but disappointment in key segments. Most notably, its Victoria’s Secret division reported an 8% dip in sales.

The news triggered an overall downgrade from S&P Global Ratings.

© 2015 Prospect News.
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