Mallinckrodt notes lower after government files lawsuit; GTT improves on ratings shift

By James McCandless

San Antonio, March 3 – The distressed debt space focused on pharmaceutical and telecom tranches on Tuesday.

Mallinckrodt plc’s notes moved lower after news broke that the government filed suit against a subsidiary for allegedly defrauding Medicaid.

Sector peer Endo International plc’s issues diverged in direction.

Telecom company GTT Communications Inc.’s paper improved despite a ratings move that included a shift to a negative outlook.

Satellite operator Intelsat SA’s notes closed the session weaker.

Meanwhile, mixed results in futures served as the backdrop for losses for Gulfport Energy Corp.’s and Whiting Petroleum Corp.’s issues as California Resources Corp.’s paper gained.

REIT Uniti Group Inc.’s notes gave back some of their Monday gains spurred on by the news that the company had reached a settlement with Windstream Holdings, Inc.

In the utilities space, PG&E Corp.’s issues tracked higher by the end of the afternoon.

Mallinckrodt down

Mallinckrodt’s notes were seen moving lower on Tuesday, traders said.

The 5¾% senior notes due 2022 fell 1½ points to close at 76 bid. The 5 5/8% senior notes due 2023 dipped 4½ points to close at 53½ bid.

Midday Tuesday, news broke that the U.S. government has filed a lawsuit against a subsidiary of the Staines-upon-Thames, England-based generic drug producer.

The government alleges that Mallinckrodt ARD LLC defrauded the Medicaid program by artificially inflating the price of Acthar Gel, one of its most popular drugs.

In the last fiscal year, the drug made up about 30% of its net sales.

“I think the weaker spots in the structure were the ones that lost the most,” a trader said.

Last year, the company sued the U.S. Department of Health and Human Services over a dispute over Medicaid rebates for Acthar Gel.

Dublin-based sector peer Endo’s issues diverged in direction.

The 6% senior notes due 2025 lost 1¼ points to close at 76¼ bid. The 6% senior notes due 2023 gained ¾ point to close at 83¾ bid.

GTT improves

Telecom company GTT’s paper improved as the session ended, market sources said.

The 7 7/8% senior notes due 2024 picked up ¾ point to close at 77 bid.

Moody’s Investor’s Service gave a B2 rating to the company’s new $140 million term loan while affirming the ratings on the company, its senior secured debt and its senior unsecured notes.

The agency also changed its outlook to negative from stable based on its expectation that the company will continue to operate under high leverage levels.

On Monday, the company released a disappointing fourth-quarter earnings report.

GTT showed a 21 cents per share loss and revenues of $423.9 million.

Luxembourg-based satellite name Intelsat’s notes closed the day weaker.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 were docked 2½ points to close at 38½ bid. Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 shaved off ½ point to close at 86 bid.

Oil mixed

Meanwhile, in energy, mixed oil futures led to similar results in distressed energy tranches, traders said.

Renewed concerns about the coronavirus, the Federal Reserve cutting interest rates and OPEC recommending cuts to output pulled futures in multiple directions.

West Texas Intermediate crude oil futures for April delivery garnered 43 cents to finish at $47.18 per barrel.

North Sea Brent crude oil futures for May delivery settled at $51.86 per barrel after a 4 cent dip.

Oklahoma City-based independent oil and gas producer Gulfport Energy’s issues lost ground.

The 6 3/8% senior notes due 2026 declined by 1½ points to close at 36 bid. The 6% senior notes due 2024 slipped ¾ point to close at 37½ bid.

Denver-based producer Whiting Petroleum’s paper also trended lower.

The 6¼% senior notes due 2023 lost ¾ point to close at 45¼ bid. The 6 5/8% senior notes due 2026 dipped 1¼ points to close at 39¼ bid.

On the other side of the spectrum, Los Angeles-based peer California Resources’ notes gained.

The 6% senior notes due 2024 picked up ¼ point to close at 22¼ bid. The 8% senior secured notes due 2022 added 1½ points to close at 23¾ bid.

Uniti negative

Property name Uniti’s issues gave back some Monday gains, market sources said.

The 7 7/8% senior secured notes due 2025 shed 1¼ points to close at 104¾ bid. The 8¼% senior notes due 2023 were pushed down 1 point to close at 96 bid.

On Monday, the 7 7/8% notes picked up 2½ points and the 8¼% notes rose 4 points.

The Little Rock, Ark.-based telecom-focused real estate investment trust announced on Monday that it had reached a settlement with Windstream, one of its largest customers, over a variety of issues such as rent.

As part of the agreement, the company will invest up to $1.75 billion in growth capital improvements, consisting of long-term fiber and related assets in certain Windstream ILEC and CLEC properties over the initial term of new leases.

A year after the first investment, annual base rent payable will increase by an amount equal to 8% of the new investment, subject to a 0.5% annual escalator.

PG&E higher

In the utilities space, PG&E’s paper tracked higher by the end of the afternoon, traders said.

The 6.05% notes due 2034 gained ¾ point to close at 114 bid.

The San Francisco-based bankrupt electric utility announced on Monday that it had entered into amended and restated Chapter 11 plan backstop commitment letters.

The amendment extends the deadline for obtaining approval of the letters in bankruptcy court.

Under the amendment, debtors would be allowed to implement the capital structure outlined in the reorganization plan so that the amount of the new equity financing component of the debtors’ capital structure would be $9 billion, with $6 billion in a “tax benefits monetization transaction” included in the capital structure.

© 2015 Prospect News.
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