Mallinckrodt worse after bankruptcy talk; California Resources down as ratings cut

By James McCandless

San Antonio, Feb. 24 – As markets were trimmed across the board, the distressed debt space was no exception with negativity persisting in the pharma and energy spaces.

Mallinckrodt plc’s notes ended the day worse off after reports indicated that the company is in talks with its creditors over a potential bankruptcy.

Sector peer Endo International plc’s issues closed the session higher.

Oil and gas name California Resources Corp.’s paper was under pressure as a ratings agency lowered several of the company’s ratings.

A weak day for oil futures spurred declines for Whiting Petroleum Corp.’s, Range Resources Corp.’s and EQT Corp.’s notes.

Meanwhile, tobacco name Pyxus International, Inc.’s issues followed the market trend as the company announces new efficiency measures.

In the telecom space, Intelsat SA’s paper took a trim as the company pushes for a larger share of C-band spectrum auction revenue.

Wireline name Frontier Communications Corp.’s notes dropped.

Mallinckrodt lower

Mallinckrodt’s notes ended the day lower, traders said.

The 4 7/8% senior notes due 2020 lost 1 point to close at 86 bid. The 5 5/8% senior notes due 2023 shaved off ½ point to close at 48½ bid.

The Dublin-based generic drug producer’s structure was sent further into distressed territory after reports indicated that it is considering bankruptcy for its U.S. generics business.

Talks with creditors over how to resolve the mounting legal costs from opioid-related legislation are ongoing.

“When Purdue went under, I was expecting names like Mallinckrodt to follow a bit quicker,” a trader said. “But I don’t think many people expect it go without some kind of restructure this year.”

The company and other opioid makers saw thousands of lawsuits from government entities pile up last year, claiming that it and others exacerbated the opioid epidemic.

Dublin-based sector peer Endo’s issues closed the session higher.

The 6% senior notes due 2025 added 1 point to close at 77 bid. The 6% senior notes due 2023 picked up 2 points to close at 84 bid.

CalRes down

Oil and gas name California Resources’ paper was under pressure, market sources said.

The 6% senior notes due 2024 lopped off 1½ points to close at 24½ bid. The 8% senior secured paper due 2022 fell 2¼ points to close at 26½ bid.

On Monday, the Los Angeles-based independent oil and gas producer received a slate of ratings downgrades from S&P Global Ratings.

The agency lowered the company’s overall rating to CC from CCC+ and also cut the rating on its 2021, 2022, and 2024 notes to CC.

The outlook is negative.

The downgrades came after the company announced a debt exchange offer targeting its second-lien notes due 2022 as well as its remaining unsecured notes due 2021 and 2024.

Oil futures weaken

A weak day for crude futures spurred declines for distressed energy names, traders said.

Renewed concerns about energy demand with the coronavirus in the backdrop led to losses in the sector.

West Texas Intermediate crude oil futures for April delivery were cut $1.95 to settle at $51.43 per barrel.

North Sea Brent crude oil futures for April delivery finished at $56.30 per barrel after a $2.20 dip.

Denver-based producer Whiting Petroleum’s notes declined.

The 6¼% senior notes due 2023 dived 3¼ points to close at 55¼ bid. The 6 5/8% senior notes due 2026 shed 3 points to close at 45¾ bid.

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

The 4 7/8% senior notes due 2025 declined by 1¼ points to close at 72¼ bid. The 5% senior notes due 2023 fell 3½ points to close at 79 bid.

Pittsburgh-based producer EQT’s paper was also under water.

The 3.9% senior notes due 2027 lost 1 point to close at 70¾ bid.

Pyxus off

Meanwhile, tobacco name Pyxus’ notes followed the market downward, market sources said.

The 9 7/8% notes due 2021 declined by 2½ points to close at 46½ bid.

Early Monday, the Morrisville, N.C.-based tobacco products producer announced a set of measures that the company calls the next step in its “transformational journey.”

As part of the strategy, the company said that it would be consolidating its CBD, industrial hemp and similar businesses into one operating model.

“There’s been a lot of questions on the profitability in this space so this is the start of addressing that,” a trader said.

Pyxus also said that it would conduct a comprehensive review of its operations, costs, and efficiencies in relation to the global trade environment.

Also, the company appointed Martin Wade as non-executive chairman of the board of directors.

Intelsat, Frontier drop

In the telecom space, Intelsat’s issues took a trim, traders said.

Intelsat Luxembourg SA’s 8 1/8% senior notes due 2023 was docked 2 points to close at 43½ bid. The 9½% senior notes due 2023 slid 3 points to close at 64 bid.

Last week, the Luxembourg-based satellite operator’s tranches dominated trading as the company pushes the Federal Communications Commission to allot more potential revenue from an upcoming C-band spectrum auction.

After the FCC outlined that Intelsat would receive around $4.85 billion, the company began arguing for at least $1 billion more.

Meanwhile, after disclosing a large stake in the name, hedge fund Appaloosa Management manager David Tepper is pushing for Intelsat to file for bankruptcy to strengthen its negotiating position for more revenue.

Norwalk, Conn.-based wireline communicator Frontier’s paper dropped.

The 10½% senior notes due 2022 lost 1 point to close at 48½ bid. The 11% senior notes due 2025 declined by ½ point to close at 48½ bid.

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