Mallinckrodt bonds trade higher as exchange starts; WeWork rises after lawsuit news

By James McCandless

San Antonio, April 7 – The distressed debt market saw shifting ground in the pharmaceutical and energy sectors on Tuesday.

Mallinckrodt plc’s notes pushed higher after announcing a private exchange at a reduced amount than previously announced.

Meanwhile, WeWork Cos. Inc.’s issues rose on news that it had filed a lawsuit against SoftBank for nixing a proposed tender offer.

Propane supplier Ferrellgas Partners, LP’s paper was under pressure as the company plans to price a new offering of secured notes.

Elsewhere in energy, as crude futures dipped, Western Midstream Partners, LP’s, Occidental Petroleum Corp.’s and Whiting Petroleum Corp.’s notes moved up.

In the retail space, Revlon, Inc.’s issues varied in direction after receiving a ratings downgrade on Monday.

Sector peer Rite Aid Corp.’s paper trailed.

Auto parts manufacturer Tenneco Inc.’s notes saw more negativity a day after an activist investor disclosed the purchase of a large stake.

Mallinckrodt higher

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

The 4 7/8% senior notes due 2020 jumped up 15½ points to close at 87 bid. The 5 5/8% senior notes due 2023 gained 3¼ points to close at 28¼ bid.

On Tuesday, the Staines-upon-Thames, U.K.-based drugmaker and subsidiaries Mallinckrodt International Finance SA and Mallinckrodt CB LLC entered into a private exchange to exchange their $495 million 4 7/8% senior notes due 2020 for new 10% first-lien senior secured notes due 2025 at a rate of $1,000 of new notes for every $1,000 of existing notes exchanged, Prospect News reported.

The company had previously planned to exchange $1.2 billion in debt until that plan was scrapped.

The issuers may redeem some or all of the new notes prior to April 15, 2022 by paying a make-whole premium. After that, the notes will be redeemable at specified redemption prices.

Prior to April 15, 2022, the issuers may redeem up to 40% of the new notes with the net proceeds of certain equity offerings.

“They are going to do what they can to survive,” a trader said. “If they can knock out a little at a time, what alternative is there?”

WeWork rises

Meanwhile, WeWork’s issues were on the rise, market sources said.

The 7 7/8% senior notes due 2025 picked up ¾ point to close at 39¼ bid.

The New York-based coworking company’s board of directors announced that it has filed a lawsuit against major investor SoftBank for withdrawing from a $3 billion tender offer.

The board argues that the move represents a breach of its fiduciary obligations under their agreement.

Last week, SoftBank announced it was pulling out of the deal, claiming it did not meet several requirements needed for the process to proceed.

The firm cited, among other things, civil and criminal investigations pending and the impact of the coronavirus pandemic.

Ferrellgas down

Propane name Ferrellgas’ paper spent the day under pressure, traders said.

The 6¾% senior paper due 2022 fell 5½ points to close at 80 bid. The 6¾% senior notes due 2023 slipped 4¾ points to close at 79½ bid.

Around midday Tuesday, the Overland Park, Kan.-based propane supplier and its wholly owned subsidiary Ferrellgas Finance Corp. announced that they intend to sell $575 million of five-year senior secured notes, Prospect News reported.

The company said that it would use the proceeds from that offering to repay all of the outstanding debt under their existing senior secured credit facility.

Last month, the company received a pair of ratings downgrades on the expectation that it would default on its subordinated notes within the next three months.

Energy names gain

Elsewhere in energy, crude futures dipped as distressed energy names moved up, market sources said.

West Texas Intermediate crude oil futures for May delivery dropped $2.45 to close at $23.63 per barrel.

North Sea Brent crude oil futures for June delivery finished at $31.87 per barrel on a $1.18 loss.

The Woodlands, Tex.-based Western Midstream’s notes trended higher.

The 3.1% senior notes due 2025 shot up 10 points to close at 81½ bid. The 4½% senior notes due 2028 bounced up 11½ points to close at 75 bid.

Houston-based independent oil and gas producer Occidental Petroleum’s issues also improved.

The 2.7% senior notes due 2022 tacked on 2 points to close at 76¾ bid. The 2.9% senior notes due 2024 gained 5¾ points to close at 67½ bid.

Denver-based producer Whiting Petroleum’s paper was lifted.

The 6¼% senior notes due 2023 improved by ¾ point to close at 10¾ bid. The 6 5/8% senior notes due 2026 inched up ¼ point to close at 10¼ bid.

Rite Aid trails

In the retail space, Revlon’s notes varied in direction, traders said.

The 5¾% senior notes due 2021 rose 7½ points to close at 70 bid. The 6¼% senior notes due 2024 shaved off ¾ point to close at 23½ bid.

On Monday, Moody’s Investors Service issued a downgrade for the New York-based cosmetics producer’s subsidiary Revlon Consumer Products Corp.’s corporate family rating, probability of default rating and senior secured term loan rating.

The agency said that the cuts reflect a high financial leverage, negative free cash flow and high refinancing risk on $500 million of unsecured notes coming due next February.

Camp Hill, Pa.-based drug store chain Rite Aid’s issues trailed.

The 6 1/8% senior notes due 2023 slipped ½ point to close at 86¼ bid.

Tenneco negative

Auto parts name Tenneco’s paper saw more negativity, market sources said.

The 5% senior notes due 2026 lost ½ point to close at 46¾ bid.

The Lake Forest, Ill.-based auto parts maker’s structure saw a fourth straight trading day of negativity, spurred by news last week that it would enact a worldwide cut in production, paired with furloughed workers, reduced executive pay and lowered 2020 capital spending.

News broke Monday that activist investor Carl Icahn had purchased 3.48 million shares of the company’s common stock at the beginning of April.

The purchase increased Icahn’s 9.9% stake in the name.

© 2015 Prospect News.
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