Endo rallies on settlement; Mallinckrodt sinks; Evergrande, Fantasia drop; Transocean up

By Cristal Cody

Tupelo, Miss., Sept. 29 – Endo International plc’s bonds climbed in the secondary market on Wednesday following the company’s report that it settled another opioid-related lawsuit.

Endo’s 6% senior notes due 2028 (Caa3/CCC+) jumped 2 points and are trading about 4 points higher week to date.

Mallinckrodt LLC’s 5¾% notes due 2022 sank 9 points in strong trading activity after the bankrupt pharmaceuticals company filed an amended Chapter 11 plan and first amended joint plan of reorganization on Wednesday.

Meanwhile, China Evergrande Group’s bonds sank further following reports the company will sell part of its ownership in Shengjing Bank for about $1.5 billion.

The real estate developer is in a 30-day grace period after it missed international bond interest payments due last week.

Fitch Ratings downgraded the company and its subsidiaries on Tuesday, noting a lack of an announcement about the coupon payment that was due Sept. 23 on Evergrande's 8¼% notes due 2022.

Fitch said its recovery analysis assumes that Evergrande would be liquidated in a bankruptcy since it is an asset-trading company.

Default concerns in the sector are spreading to other issuers.

Fantasia Holdings Group Co. Ltd.’s 10 7/8% senior notes due 2023 (B/CCC) traded Wednesday over 8 points softer from where the paper was last seen in the prior week.

S&P Global Ratings downgraded Fantasia on Wednesday to CCC from B, noting “substantial risk” over the issuer’s ability to pay upcoming debt obligations, including its senior notes due Oct. 4 and due Dec. 18 totaling $760 million.

Endo bonds up

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC+) climbed 2 points to head out at 71 bid, a source said.

Secondary volume totaled $12 million.

The issue has climbed about 4 points this week and are trading about 7½ points better month to date.

Endo announced on Tuesday that it reached an agreement with the Louisiana Attorney General's office to settle all opioid-related cases and claims for $7.5 million.

The latest settlement follows Endo’s Sept. 9 announcement that subsidiaries Endo Health Solutions Inc., Endo Pharmaceuticals Inc., Par Pharmaceutical, Inc. and Par Pharmaceutical Cos, Inc. settled three opioid-related cases in New York for $50 million.

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

Those settlements followed other settlements announced July 21, including up to $26 billion with Johnson & Johnson and distributors AmerisourceBergen Drug Corp., Cardinal Health Inc. and McKesson Corp. over the opioid epidemic.

New York’s opioid-related lawsuits against Mallinckrodt and Rochester Drug Cooperative are moving separately through U.S. Bankruptcy Court.

Mallinckrodt declines

Mallinckrodt’s 5¾% notes due 2022 plunged 9 points to 48½ bid by the close in strong trading activity on Wednesday, a source said.

The issue traded ½ point weaker on Tuesday and ½ point softer on Monday in light supply.

The notes have declined from the 67 bid area at the start of September.

The pharmaceuticals company filed an amended Chapter 11 plan and first amended joint plan of reorganization on Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

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

China developers soft

China Evergrande’s 8¾% senior notes due 2025 (C/C/C) softened about ¾ point to 23¾ bid by the end of Wednesday’s session, a source said.

The notes dropped 1 5/8 points in secondary trading on Tuesday and fell 5/8 point on Monday.

The Shenzhen, China-based real estate developer has entered into a 30-day grace period following missed bond payments due last week, according to market sources.

China-based property developer Fantasia Holdings Group’s 10 7/8% senior notes due 2023 (B/CCC) were quoted at 32 3/8 bid on Wednesday, down about 8½ points week to date.

Transocean up, Peabody flat

Distressed energy bonds stayed mostly stronger despite weaker oil prices for a second day, according to market sources.

Offshore driller Transocean Inc.’s bonds improved about 1½ points to 2¼ points on Wednesday.

The Vernier, Switzerland-based company’s 8% debentures due 2027 (C/CCC) rose nearly 1¾ points to the 79 bid area on over $7 million of volume.

Transocean’s 6.8% senior notes due 2038 (C/CCC) climbed 2¼ points to 59¼ bid in lighter supply totaling $1.25 million.

Market tone was mixed over Wednesday’s session.

Brent crude futures for November deliveries fell 45 cents to settle at $78.64 a barrel.

The iShares iBoxx High Yield Corporate Bond ETF recovered 16 cents to close at $87.59 after declining 40 cents on Tuesday.

Measured market volatility dipped 2.97% after soaring nearly 24% on Tuesday.

The Chicago Board Options Exchange’s CBOE Volatility index declined to 22.56 by the close from 23.25 the previous day.

St. Louis-based coal producer Peabody Energy Corp.’s 8½% senior secured notes due 2024 (Caa1/CCC-) were flat on Wednesday at 87 5/8 bid after rallying earlier in the week, a source said.

The notes are about 1 1/8 points better week to date.

Distressed returns down

Distressed index returns softened in line with the weak market tone on Tuesday.

The S&P U.S. High Yield Corporate Distressed Bond index total return declined to minus 0.1% on Tuesday from 0.72% on Monday.

Month-to-date total returns were 2.29% in the prior session, down from 2.4% on Monday.

Year-to-date total returns totaled 29.59% in the prior session versus 29.72% at the start of the week.

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