Evergrande, AMC decline; Endo, Intelsat Jackson flat; Mallinckrodt up; Transocean drops

By Cristal Cody

Tupelo, Miss., July 26 – China Evergrande Group’s bonds dropped 1¾ points to 2¼ points following the company’s downgrade Monday by S&P Global Ratings.

The company’s notes have been on the downswing over the summer with the bonds “slumped into the mid-50s on price, implying a strong likelihood of a restructuring,” BofA Securities, Inc. analysts said in a report on Friday.

China’s growing economic weakness remains a top risk concern for the dollar-denominated bond market.

The country is the second-largest dollar “corporate bond market in the world, and 15% of it is trading at distressed levels (both IG and HY),” the analysts said.

In other distressed trading on Monday, AMC Entertainment Holdings, Inc.’s 12% second-lien senior secured notes due 2026 (Ca/C) fell ¼ point with the notes quoted about 12¼ points weaker month to date.

Endo International plc’s bonds steadied with the 6% senior notes due 2028 (Caa2/CCC+) mostly flat after ending Friday about 10 points better on the week.

Bankrupt pharmaceuticals maker Mallinckrodt LLC’s paper climbed during the session.

Intelsat Jackson Holdings SA’s paper was mostly unchanged after the company’s Chapter 11 bankruptcy statement hearing was adjourned.

In the energy space, Transocean Inc.’s notes fell 1 point to 2½ points by the close.

PBF Holding Co. LLC’s paper traded about ¼ point to ½ point weaker.

China Evergrande down

China Evergrande Group’s 10% senior notes due 2023 (B3/CCC+) softened 1¾ points to 57 bid on $5 million of paper traded, a source said Monday.

The company’s 9½% senior notes due 2029 (B3/CCC+) shed 2¼ points to head out at 52¼ bid. Trading volume in the issue was light with $1 million of volume.

S&P said it downgraded China Evergrande, Hengda Real Estate Group Co. Ltd. and Tianji Holding Ltd.

The agency also lowered the issuer’s bond ratings based on a weakening in Evergrande’s funding access that limits its liquidity position and ability to reduce debt. S&P notes Evergrande Group has more than $6 billion of offshore maturities due in 2022.

AMC declines

AMC Entertainment Holdings’ 12% second-lien senior secured notes due 2026 (Ca/C) fell ¼ point to 89¾ bid in heavy trading totaling $17 million on Monday, a source said.

The notes have declined from where the issue was seen trading on Wednesday at 91, 91½.

The Leawood, Kan.-based movie theater owner’s notes have declined about 12¼ points month to date.

Endo holds gains

Endo International’s bonds steadied on Monday after climbing higher in heavy distressed secondary trading in the prior week, a source said.

Endo Finance LLC’s 6% senior notes due 2028 (Caa2/CCC+) were mostly flat at 70 bid.

The issue ended the prior week about 10 points better.

Endo’s paper improved following the company’s $35 million opioid-related settlement announced on Thursday.

The Dublin-based pharmaceuticals maker’s settlement followed the announcement on Wednesday of up to a $26 billion settlement with states from Johnson & Johnson and distributors AmerisourceBergen Drug Corp., Cardinal Health Inc. and McKesson Corp. over the opioid epidemic.

On Tuesday, New York attorney general Letitia James announced the state reached a $1.1 billion agreement with the distributors, while its lawsuits against other companies, including Endo Health Solutions, Teva Pharmaceuticals USA, Allergan Finance and Mallinckrodt, were continuing separately.

Mallinckrodt higher

Mallinckrodt’s notes traded about ¼ point to 1¼ points better on Monday, according to market sources.

The company’s 5 5/8% notes due 2023 rose 7/8 point to 69 1/8 bid on $7 million of secondary volume during the session.

New York’s lawsuit against Mallinckrodt is moving through U.S. Bankruptcy Court.

The pharmaceuticals maker 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.

Intelsat Jackson unchanged

Intelsat Jackson Holdings’ 5½% senior notes due 2023 were quoted flat on Monday at 55½ bid after the company’s Chapter 11 bankruptcy statement hearing was adjourned, a source said.

The notes are down from the 67½ bid range at the start of the year.

Parent company Intelsat SA’s Chapter 11 bankruptcy statement hearing, originally scheduled for May 11, was adjourned to Aug. 18 from Aug. 11, according to a notice on Saturday with the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division.

The McLean, Va.-based satellite operator announced in February that it reached a Chapter 11 bankruptcy restructuring plan that would reduce its debt to $7 billion from nearly $15 billion.

Intelsat filed for Chapter 11 bankruptcy on May 4, 2020.

Distressed index flat

Overall market tone was soft as the week kicked off with a heavy schedule of corporate earnings releases.

Market focus also was shifting toward the Federal Reserve’s two-day monetary policy meeting that starts on Tuesday.

The iShares iBoxx High Yield Corporate Bond ETF fell 13 cents to $87.82.

Oil prices were mixed.

North Sea Brent crude oil futures for September deliveries settled up 40 cents to $74.50 a barrel.

West Texas intermediate crude oil benchmark futures for September deliveries fell 16 cents to settle Monday at $71.91 a barrel.

The S&P U.S. High Yield Corporate Distressed Bond index ended Friday flat with minus 3.23% month-to-date total returns and positive year-to-date total returns of 23.73%.

Energy bonds soften

In distressed energy issues, Transocean’s notes fell 1 point to 2½ points by the close, a market source said.

Transocean’s 8% debentures due 2027 (C/CCC) were quoted off 1 point at 75¼ bid on $2 million of trading supply.

The 11½ senior guaranteed notes due 2027 (Caa3/CCC+) shed 1 3/8 points on Monday to trade at 99 5/8 bid on $3 million of volume.

The Vernier, Switzerland-based offshore driller’s 7½% senior notes due 2031 (Ca/CCC) also were quoted down 2½ points at 62 bid on $1 million of trading volume.

PBF Holding’s 9¼% senior secured notes due 2025 (Ba3/BB/BB) fell ¼ point to 92 bid on more than $16 million of issues traded during Monday’s session, a source said.

The Parsippany, N.J.-based petroleum refiner’s 7¼% senior notes due 2025 (B3/B+/B+) were down about ½ point to 57½ bid on Monday.

The issue finished Friday about 10 points softer on the week.

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