Mallinckrodt declines; PBF active; Shelf Drilling, Talen up; China Evergrande softens

By Cristal Cody

Tupelo, Miss., Sept. 24 – Distressed pharmaceutical and energy names were among the most active bond issues in the secondary market on Friday.

“There’s not a whole lot going on in distressed,” a trader said. “We still have a lot of new high-yield issues.”

Mallinckrodt LLC’s 5¾% notes due 2022 had been quiet all week until the bankrupt pharmaceuticals maker’s issue racked up $23 million of secondary trading on Friday.

“Mallinckrodt was active and lower,” a source said. “They ended up all over the place but the 5¾% notes were in the 57½-ish area. Earlier in the month, they were in the 60s so they’re definitely lower.”

Endo International plc’s notes were mostly unchanged to about ¼ point softer in thin volume.

PBF Holding Co. LLC’s bonds were steady to about ¾ point better in strong supply.

Oil prices remained higher on Friday while stocks were mixed.

The iShares iBoxx High Yield Corporate Bond ETF fell 13 cents to close at $87.91.

Brent crude futures for November deliveries settled up 84 cents to $78.09 a barrel.

Talen Energy Supply LLC’s paper saw a “decent amount” of trading during the session, a source said. The 10½% senior notes due 2026 (B3/CCC/B-) were up about ¼ point on the day and 5¾ points better on the week.

United Arab Emirates-based Shelf Drilling Holdings Ltd.’s 8¼% senior notes due 2025 (Caa3/CCC+) rallied 1¼ points to 78 bid on light volume of $1.5 million. The notes traded about 2 points stronger on Thursday on over $4.5 million of supply.

Crossover name Diamondback Energy, Inc. (Ba1/BBB-/BBB) saw its long bond down about ¾ point.

The Midland, Tex., oil and natural gas company’s 4.4% senior notes due 2051 tied to rates “were super active today,” a trader said. “Rates got killed yesterday, so today rate-based names were lower.”

Evergrande, Sunac down

The distressed China property developer space was mostly soft on Friday as investors wait on if China Evergrande Group will default on its debt, sources said.

China Evergrande Group’s 8¾% senior notes due 2025 (C/C/C) were down nearly 3½ points at 26¾ bid on $3 million of secondary supply.

The Shenzhen, China-based real estate developer’s notes were 2 1/8 points softer on Thursday on volume totaling more than $17.5 million.

Sunac China Holdings Ltd.’s dollar bonds slumped nearly 3½ points to 5¼ points over the session.

The Tianjin, China-based property developer’s 7.95% notes due 2023 (B1/BB-) sank 5¼ points to 89¾ bid on $4 million of supply.

Mallinckrodt lower

Mallinckrodt’s 5¾% notes due 2022 headed out at 58½ bid on $23 million of paper traded on Friday, a source said.

The issue was last seen in the secondary market in thin trading on Sept. 17 at the 60½ bid range, down from the 67 bid area at the start of the month.

The company’s Chapter 11 bankruptcy hearing is underway in the U.S. Bankruptcy Court for the District of Delaware.

An omnibus hearing scheduled for Monday was canceled with permission of the court, according to a court filing on Thursday.

Mallinckrodt, based in Dublin and St. Louis, filed for Chapter 11 bankruptcy on Oct. 12, 2020.

Endo declines

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC+) edged ¼ point lower on Friday to 67 bid in thin volume, a source said.

Endo’s bonds are trading about 4 points better month to date following the company’s announcement earlier in September that its subsidiaries have settled three opioid-related cases in New York for $50 million.

The Dublin-based pharmaceuticals maker also announced in July that subsidiaries reached a $35 million opioid-related settlement in Tennessee.

PBF remains strong

PBF’s 6% senior notes due 2028 (Caa1/B/B+) were mostly flat at the 63 bid area on more than $14.5 million of issues traded, a source said.

The company’s 7¼% senior notes due 2025 (Caa1/B/B+) rose ¾ point to 68½ bid in light volume totaling $1 million after adding 1¾ points on nearly $7 million of volume on Thursday.

Moody’s Investors Service downgraded PBF on Sept. 15 and kept a negative outlook on the Parsippany, N.J.-based petroleum refiner.

Talen better on week

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) rose ¼ point to 56¼ bid, a source said Friday.

The issue headed out 5¾ points better from where the paper ended the prior week.

Talen announced on Tuesday that a subsidiary secured up to a $175 million strategic capital partnership with Orion Energy Partners.

The Woodlands, Tex., and Allentown, Pa.-based power company said the investment will be used to fund its clean energy efforts and a bitcoin mining joint venture.

Distressed index positive

Distressed index returns remained higher over the week after Monday’s sell-off.

The S&P U.S. High Yield Corporate Distressed Bond index total return was 0.33% on Thursday versus 0.41% on Wednesday, 0.51% on Tuesday and minus 1% on Monday.

Month-to-date total returns improved to 1.42% on Thursday from 1.09% on Wednesday, 0.67% on Tuesday and 0.16% at the week’s start.

Year-to-date total returns grew to 28.49% on Thursday, compared to 28.06% on Wednesday, 27.54% on Tuesday and 26.89% on Monday.

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