Energy steadies; Transocean mixed; Shelf Drilling flat; Callon, Endo, AMC bonds higher

By Cristal Cody

Tupelo, Miss., July 20 – Distressed energy bonds mostly steadied on Tuesday after declining on Monday in heavy volatility.

Oil-related bonds from issuers including Occidental Petroleum Corp. and PBF Holding Co. LLC traded about 2 points to 3½ points higher by the end of the session, sources said.

Transocean Inc.’s bonds were mixed in the secondary market after shedding about 6 points to 9 points on Monday.

The Vernier, Switzerland-based offshore driller’s 7½% notes due 2026 (Ca/CCC+) dropped 1 7/8 points to 77 1/8 bid on $4 million of secondary supply, a source said.

The issue was quoted down 6 points on Monday.

Transocean’s 8% notes due 2027 (Ca/CCC-) improved 3¼ points to 73¾ bid on $8.5 million of secondary trades.

The notes dove 9 points on Monday on $6 million of volume.

United Arab Emirates-based Shelf Drilling Holdings Ltd.’s 8¼% senior notes due 2025 (Caa3/CCC+) were mostly unchanged at just under the 75 bid area after declining over 5 points on Monday.

Houston-based Callon Petroleum Co.’s 8% senior notes due 2028 (Caa2/D) gained 2½ points to 92½ bid by late afternoon after trading down 6¼ points on Monday.

Index returns eyed

Market tone improved on Tuesday after Monday’s sell-off in the bond and equity markets sparked by oil production cuts ending by 2022 and growing cases of Covid-19 variants.

The S&P U.S. High Yield Corporate Distressed Bond index sank 1.77% on Monday. The index posted month-to-date total returns of minus 4.15%. Year-to-date total returns were 22.56% on Monday, down from 24.76% on Friday.

The “Fear Factor” index also surged on Monday, a source said.

The Chicago Board Options Exchange’s CBOE Volatility index climbed more than 32% early Monday before finishing the day up 21.95% at 22.50.

By the close on Tuesday, the VIX had declined 12.09% to 19.82. The index’s 52-week high is 41.16.

Volatility subsided during Tuesday’s session as oil prices recovered.

The iShares iBoxx High Yield Corporate Bond ETF, which fell 59 cents on Monday, recovered 44 cents to end at $87.52.

West Texas Intermediate crude oil benchmark futures for August deliveries, which settled down $5.39 on Monday, added $1 on Tuesday to settle at $67.42 a barrel. September deliveries rose 85 cents to settle at $67.20 after sinking $5.21 on Monday.

North Sea Brent crude oil futures for September deliveries added 73 cents to settle the day at $69.35 a barrel. Brent crude prices dropped $4.97 on Monday.

Endo bonds up

Bonds from distressed pharmaceutical makers traded flat to higher on Tuesday following reports of additional opioid lawsuit settlements.

Local and state government representatives reported Tuesday an expected $26 billion settlement with Johnson & Johnson and distributors AmerisourceBergen Drug Corp., Cardinal Health Inc. and McKesson Corp.

New York attorney general Letitia James announced a $1.1 billion agreement with the distributors as part of the “national pot” to combat the opioid epidemic.

A trial against Endo Health Solutions, Teva Pharmaceuticals USA and Allergan Finance over opioids is underway in New York state court, according to the release on Tuesday.

The attorney general filed a lawsuit against the companies and others, including Mallinckrodt LLC, in March 2019.

Endo Finance LLC’s paper gained following the announcement as one of the most active distressed names in the market.

Endo’s 6% senior notes due 2028 (Caa2/CCC+) traded nearly 5¾ points better at 65¾ bid on more than $22 million of secondary volume, a source said.

Endo’s 9½% senior secured notes due 2027 (Caa2/CCC+) were quoted up 1 point at 97¼ bid.

The company’s paper ended Friday mixed after parent Dublin-based pharmaceuticals maker Endo International plc reported several orders by the Tennessee Supreme Court and state court of appeals regarding a default judgment related to opioids.

Endo will release its second-quarter results on Aug. 5.

Mallinckrodt mostly flat

New York’s attorney general said in the release that the state’s cases against Mallinckrodt and Rochester Drug Cooperative are moving separately through U.S. Bankruptcy Court.

Mallinckrodt’s notes were mostly unchanged during the session, a source said.

The bankrupt pharmaceuticals maker’s 4¾% notes due 2023 traded flat at 23½ bid late afternoon.

Mallinckrodt filed a new joint Chapter 11 plan of reorganization and received conditional approval of its disclosure statement on June 16.

A hearing to confirm the plan is scheduled for Sept. 21-22.

The company, based in Dublin and St. Louis, filed for Chapter 11 bankruptcy on Oct. 12, 2020 in the U.S. Bankruptcy Court for the District of Delaware.

AMC sees upside

Meanwhile, AMC Entertainment Holdings, Inc.’s bonds improved 3½ to 4 points by the end of Tuesday’s session after declining in volatile trading on Monday, a source said.

AMC’s 12% second-lien senior secured notes due 2026 (Ca/C) recovered 3½ points to head out at 90½ bid on more than $22 million of bond volume.

The 12% notes sank 4½ points by the close on Monday on over $26 million of issues traded.

The Leawood, Kan.-based movie theater owner’s notes declined more than 7 points in the prior week.

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