PG&E bonds better on potential tax news; Mallinckrodt gains as company touts debt cut

By James McCandless

San Antonio, Jan. 13 – The Monday session in the distressed debt space saw a focus on newsmakers in the utilities and pharmaceutical sectors.

PG&E Corp.’s notes saw better movement as news broke of a potential for the company to save hundreds of millions of dollars in taxes.

In the pharma space, Mallinckrodt plc’s issues gained ground as the company highlighted its debt reduction efforts at a conference.

Sector peer Endo International plc’s paper continued to track higher on the back of its opioid-related settlement with Oklahoma.

Meanwhile, oil futures trailed, Chesapeake Energy Corp.’s, Valaris plc’s and Whiting Petroleum Corp.’s notes were under pressure.

Telecom name Frontier Communications Corp.’s issues saw weakness as an interest payment date for some of its structure looms.

Satellite operator Intelsat SA’s notes improved.

Elsewhere, in retail, L Brands, Inc.’s notes fell as the name grapples with a perpetually weak sector.

PG&E better

PG&E’s notes saw better movement through the Monday session, traders said.

The 6.05% notes due 2034 picked up 2 points to close at 109½% bid.

By the close, the 6.05% notes saw about $344 million change hands.

The elevation in trading levels in the San Francisco-based bankrupt electric utility was sparked by news that the company stands to save about $470 million in taxes.

In a late Friday filing with the Securities and Exchange Commission, PG&E said that much of its wildfire recovery and prevention work that is included in its $1.68 billion settlement with California could be deducted from state and federal taxes.

“Apparently they take some losses for not charging customers for that work,” a trader said. “So that may be favorable tax wise.”

Last week, the recipients of a $13.5 billion wildfire victim settlement became involved with a dispute with California and federal emergency management agencies over covering their costs for emergency services.

Mallinckrodt gains

In the pharma space, Mallinckrodt’s issues gained ground, market sources said.

The 4 7/8% senior notes due 2020 jumped up 4 points to close at 73½ bid. The 5¾% senior notes due 2023 added ½ point to close at 38½ bid.

On Monday, chief executive officer Mark Trudeau touted the Dublin-based drugmaker’s debt reduction efforts in 2019 and signaled for further cuts in 2020 at a conference, Prospect News reported.

“We reduced our debt by over $1 billion in 2019, including a very successful debt exchange which netted us almost $400 million in net debt reductions,” Trudeau said.

He went on to acknowledge the $600 million in paper maturing in April, saying that there were several options available to address it.

The company has faced increased market scrutiny in the last year over its numerous legal entanglements stemming from its alleged role in the opioid epidemic.

Endo notes higher

Sector peer Endo’s paper continued to track higher, traders said.

The 6% senior notes due 2025 rose 1 point to close at 71½ bid. The 6% senior paper due 2023 tacked on ¼ point to close at 76½ bid.

On Friday, the 2025 notes rose ¾ point.

Late last week, the Dublin-based generic drug producer announced that it had reached an $8.75 million settlement over opioid claims with Oklahoma.

The agreement includes no admission of wrongdoing, a ban on the company hiring representatives in the state and a ban on paying for promotional materials.

Oil names down

Trailing oil futures spurred pressure on distressed energy tranches, market sources said.

Futures were pushed lower as the market focused on a decrease of demand in crude.

West Texas Intermediate crude oil futures for February delivery dipped 96 cents to settle at $58.08 per barrel.

North Sea Brent crude oil futures for March delivery finished at $64.20 per barrel after a 78 cent slip.

Oklahoma-based independent oil and gas producer Chesapeake Energy’s notes were under water.

The 11½% senior notes due 2025 fell 4 points to close at 89 bid.

London-based contract driller Valaris’ issues followed the sector lower.

The 4½% senior notes due 2024 dropped 2¾ points to close at 57¼ bid. The 5.2% senior notes due 2025 shed 1 point to close at 56½ bid.

Denver-based producer Whiting Petroleum’s paper also experienced a decline.

The 6¼% senior paper due 2023 moved down 2¼ points to close at 85¼ bid. The 6 5/8% notes due 2026 declined by 1¾ points to close at 68 bid.

Frontier weaker

Telecom name Frontier’s notes closed the session weaker, traders said.

The 10½% senior notes due 2022 lost ½ point to close at 45 bid. The 11% senior notes due 2025 slipped ½ point to close at 45 bid.

While there was no news out about the Norwalk, Conn.-based wireline communicator, the market increased its attention on the name on Monday.

“Some of the paper has interest payments coming on the 15th,” a trader said. “Everyone is watching to see how they handle that.”

The company has endured months of speculation on the potential timing of a reorganization or bankruptcy filing, most recently fueled by news in November that it had tapped the remainder of its credit facility.

Luxembourg-based satellite operator Intelsat’s issues improved.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 picked up ½ point to close at 66 bid. The 9½% senior notes due 2023 gained ¼ point to close at 77 bid.

L Brands falls

Elsewhere, in retail, L Brands’ paper fell to lower levels, market sources said.

The 6¾% senior notes due 2036 lost ¼ point to close at 90 bid. The 5¼% senior notes due 2028 dipped 1¼ points to close at 95¼ bid.

Last week, the Columbus, Ohio-based department store chain came under additional scrutiny after reporting holiday sales data.

The retailer reported $3.9 billion in sales for the period ending Jan. 4, a contraction from the previous year.

The company experienced a 3% loss in comparable-store sales while ailing segment Victoria’s Secret saw a 12% comparable-store sales drop.

© 2015 Prospect News.
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