Mallinckrodt notes eyed after ratings downgrade; Transocean varies in energy space

By James McCandless

San Antonio, Aug. 7 – Hitting the end of the week, distressed pharmaceutical and energy tranches had most of the market’s attention.

Mallinckrodt plc’s notes diverged in direction after receiving a ratings downgrade in reaction to its latest earnings report.

Meanwhile, in the oil and gas space, Transocean Ltd.’s issues varied as it received its own ratings cut.

Sector peer Gulfport Energy Corp.’s paper improved despite issuing a going concern warning due to an unfavorable debt profile.

Crude futures finished the week on the decline, followed by Occidental Petroleum Corp.’s notes as Whiting Petroleum Corp.’s issues yielded mixed results.

Property owner CBL & Associates Properties, Inc.’s paper drifted lower after releasing its second-quarter earnings report.

Mall name Washington Prime Group Inc.’s notes gained.

Elsewhere, Bombardier Inc.’s issues differed a day after reporting a loss in its latest earnings report.

Auto parts name Tenneco Inc.’s paper spent the session rising on the back of its results for the second quarter.

Mallinckrodt diverges

Mallinckrodt’s notes diverged in direction to finish up the week, traders said.

The 5¾% senior notes due 2022 gave up ¾ point to close at 25½ bid. The 5 5/8% senior notes due 2023 moved up 1 point to close at 24½ bid.

Late Thursday, S&P Global Ratings issued downgrades for the Staines-upon-Thames, England-based pharmaceuticals producer.

The agency cut its overall rating to CCC- from CCC, lowered issue-level ratings and put all of its ratings on CreditWatch with negative implications.

S&P said that the change reflects its view that the company will file for Chapter 11 bankruptcy or make a distressed exchange within six months.

The name recently reported a second-quarter earnings per share profit of $1.89 and revenues of $700.9 million, surpassing analyst expectations.

Mallinckrodt recently said that it may be forced to file for bankruptcy due to numerous pressures, including ongoing litigation with the government.

Transocean varies

Meanwhile, in the oil and gas space, Transocean’s issues varied, market sources said.

The 7½% senior notes due 2031 rose 1¼ points to close at 28¾ bid. The 8% senior notes due 2027 shaved off ½ point to close at 43 bid.

Also after the Thursday close, S&P announced that it gave a ratings downgrade to the Steinhausen, Switzerland-based contract driller.

The agency cut its overall rating to SD from CCC while its other ratings remained unchanged.

The shift is in reaction to the company’s $356 million exchange of its existing 0.5% exchangeable bonds due 2023 for $213 million of new 2.5% senior guaranteed exchangeable bonds due 2027.

S&P considers the transaction a distressed exchange and tantamount to a default.

During Thursday activity, the name said it would be conducting a strategic alternatives review.

Gulfport improves

Sector peer Gulfport Energy’s paper improved by the end of the day, traders said.

The 6 3/8% senior paper due 2025 picked up 2¾ points to close at 53¾ bid. The 6 3/8% senior paper due 2026 garnered 1 point to close at 53½ bid.

During the Friday session, the Oklahoma City-based independent oil and gas producer issued a going concern warning, saying that it would not be able to continue if it is unable to refinance a revolving credit facility with $123 million currently owed.

“I would think that they would be able to refinance,” a trader said. “It may be some kind of distressed exchange.”

The company’s liabilities total about $2.3 billion.

Earlier in the week, the name released the results of its second quarter earnings.

Earnings per share came in at a 29 cents per share profit, beating analyst expectations of a 1 cent per share loss.

Revenues fell below predictions at $132.41 million.

Oil declines

Crude oil futures finished the week on the decline, with distressed energy tranches trending the same way, market sources said.

West Texas Intermediate crude oil futures for September delivery dipped 73 cents to cap the week at $41.22 per barrel.

North Sea Brent crude oil futures for October delivery settled at $44.40 per barrel after a 69-cent loss.

Houston-based producer Occidental Petroleum’s notes followed futures lower.

The 2.9% senior notes due 2024 shed ¼ point to close at 94¼ bid. The 2.7% senior notes due 2022 were docked ¼ point to close at 97 bid.

Denver-based E&P Whiting Petroleum’s issues yielded mixed results.

The 6¼% senior notes due 2023 declined by 1¼ points to close at 18½ bid. The 6 5/8% senior notes due 2026 pushed up ¼ point to close at 18½ bid.

CBL lower, Wash Prime gains

Property owner CBL’s paper drifted lower by the end of the afternoon, traders said.

The 5¼% senior paper due 2023 chalked off 2½ points to close at 22 bid. The 4.6% senior paper due 2024 fell ¼ point to close at 23¾ bid.

Late Thursday, the Chattanooga, Tenn.-based real estate investment trust released its second-quarter earnings report.

Earnings per share was shown as a 5 cents per share profit.

Revenues were pegged at $124.2 million, coming in below consensus estimates.

The company said as part of the release that it is hoping to reach a mutually beneficial outcome in its ongoing talks with lenders.

The name was able to collect 49% of its billed rents in July.

Columbus, Ohio-based mall name Washington Prime’s notes gained.

The 6.45% senior notes due 2024 rose ½ point to close at 39 bid.

Bombardier differs

Elsewhere, manufacturer Bombardier’s issues differed, market sources said.

The 4.6% senior notes due 2024 dipped ¼ point to close at 23¾ bid. The 6% senior notes due 2022 held level to close at 90¾ bid.

The Montreal-based air and rail manufacturer’s issues were seeing heightened attention after being one of the latest to release its earnings for the second quarter.

The company reported an earnings per share loss of 30 cents and revenues of $2.7 billion, representing a lukewarm quarter.

Due to the coronavirus pandemic, sales dropped by 37%.

Tenneco rises

Auto parts name Tenneco’s paper spent the session rising, traders said.

The 5% senior paper due 2026 picked up 1 point to close at 72½ bid.

The Lake Forest, Ill.-based automotive company threw its earnings report on this week’s pile early Thursday.

The company reported an earnings per share loss of $2.15 per share and revenues of $2.64 billion, both passing expectations.

Sales took a 40% reduction.

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