Mallinckrodt jumps on bankruptcy settlement; California Resources eyed in energy space

By James McCandless

San Antonio, Feb. 25 – The distressed debt market continued to focus on shifting ground in the pharma and energy sectors.

Mallinckrodt plc’s notes jumped after the company announced that a bankruptcy filing for its U.S. generics business was part of a settlement of opioid-related claims.

Sector peer Endo International plc’s issues climbed, swept up in the space’s positivity.

Meanwhile, energy producer California Resources Corp.’s paper varied in the midst of an exchange offer.

More losses for oil futures served as the backdrop for weakness in Diamond Offshore Drilling, Inc.’s, Whiting Petroleum Corp.’s and EQT Corp.’s notes.

Elsewhere, in telecom, Intelsat SA’s issues were under pressure as the company jockeys for more revenue from a C-band spectrum auction.

Wireline communications name Frontier Communications Corp.’s paper also fell.

In the retail space, L Brands, Inc.’s notes closed on lower ground.

Mallinckrodt, Endo jump

Mallinckrodt’s notes jumped higher during the Tuesday session, traders said.

The 5¾% senior notes due 2022 shot up 23½ points to close at 82 bid. The 5 5/8% senior notes due 2023 rose 20½ points to close at 69 bid.

About $98 million of the two tranches combined changed hands.

On Tuesday morning, news broke that the Dublin-based generic pharmaceuticals producer has reached a settlement to resolve all opioid-related litigation that has piled up in recent months.

As part of the settlement, the company agreed to pay $1.6 billion and would have its U.S. generics business file for Chapter 11 bankruptcy.

The deal also includes warrants to purchase a 20% equity stake in the name.

Concurrently, the company and subsidiaries Mallinckrodt International Finance SA and Mallinckrodt CB LLC have agreed to exchange their existing 5¾% senior notes due 2022 for new 10% second-lien senior secured notes due 2025, Prospect News reported.

Also, in its fourth-quarter earnings report, Mallinckrodt showed a profit of $2.40 per share, higher than the expected $2.05 per share profit.

“All of this combined really boosted the entire space,” a trader said. “It should keep the structure active through the rest of the week.”

Dublin-based sector peer Endo’s issues also climbed.

The 6% senior notes due 2023 picked up 2 points to close at 86 bid. The 6% senior notes due 2025 improved by 2½ points to close at 80½ bid.

CalRes varies

Meanwhile, energy producer California Resources’ paper varied in direction, market sources said.

The 6% senior notes due 2024 shaved off ½ point to close at 24 bid. The 8% senior secured notes due 2022 inched up ¼ point to close at 26¾ bid.

The Los Angeles-based independent oil and gas producer’s paper has remained in high demand amid an exchange offer for its second-lien notes due 2022 as well as its remaining unsecured notes due 2021 and 2024.

As part of the offer, the company plans to issue $454 million principal amount of new term loans and common stock warrants and $275 million principal amount of Royalty notes and class B common shares of Royalty.

Reacting to the news, S&P Global Ratings lowered the company’s overall rating to CC from CCC+ and also shaved its 2021, 2022 and 2024 notes to CC.

Oil names down

Oil futures experienced more losses, resulting in more weakness for distressed energy names, traders said.

Coronavirus fears persisted as the market continued to worry about lower demand.

West Texas Intermediate crude oil futures for April delivery slipped $1.53 to settle at $49.90 per barrel.

North Sea Brent crude oil futures for April delivery finished at $54.95 per barrel after a $0.35 squeeze.

Houston-based contract driller Diamond Offshore’s notes followed futures downward.

The 3.45% senior notes due 2023 dipped 3 points to close at 74 bid.

Pittsburgh-based producer EQT’s issues followed the sector trend.

The 6 1/8% senior notes due 2025 moved down ¾ point to close at 83½ bid.

Denver-based peer Whiting Petroleum’s paper closed the afternoon worse off.

The 6¼% senior notes due 2023 shed 2¼ points to close at 53 bid. The 6 5/8% senior paper due 2026 drifted down 1 point to close at 44¾ bid.

Intelsat, Frontier fall

Elsewhere, in telecom, Intelsat’s notes were under pressure, market sources said.

Intelsat Luxembourg SA’s 8 1/8% senior notes due 2023 declined by 2 points to close at 41½ bid. The 9½% senior notes due 2023 lost 2 points to close at 62 bid.

The Luxembourg-based satellite operator’s structure has seen negativity over the last few trading days as the company tries to convince the Federal Communications Commission to increase its revenue share from a C-band spectrum auction.

In a tentative plan released recently, Intelsat is expected to receive about $4.85 billion from any sale, though the company argues that it should get at least $1 billion more.

Appaloosa, a hedge fund that recently disclosed a large stake in Intelsat, is pushing for a bankruptcy filing in a bid to better its negotiating position.

The FCC plans to vote on whether to confirm the plan on Feb. 28.

Norwalk, Conn.-based wireline name Frontier’s issues also fell.

The 10½% senior notes due 2022 slipped 1 point to close at 47½ bid. The 11% senior notes due 2025 dropped ¾ point to close at 47¾ bid.

L Brands lower

In the retail space, L Brands’ paper closed on lower ground, traders said.

The 6¾% senior notes due 2036 lost ¼ point to close at 104¼ bid. The 5¼% senior paper due 2028 declined by ½ point to close at 99 bid.

The Columbus, Ohio-based retailer has remained active and topical following last week’s announcement that it would sell a 55% stake in its Victoria’s Secret brand to private equity name Sycamore Partners.

The company had previously been under pressure to produce a turnaround for the division, which had seen consistent declines in sales quarter by quarter.

As part of the deal, long-time chief executive officer Leslie Wexner said he would be resigning from the position upon the close of the sale.

© 2015 Prospect News.
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