Oil prices lift energy bonds; Talen up; Endo gains; Mallinckrodt shows signs of recovery

By Cristal Cody

Tupelo, Miss., Oct. 7 – Oil prices rallied back, keeping energy names mostly higher on Thursday in the distressed secondary market.

Talen Energy Supply LLC’s 10½% senior notes due 2026 (B3/CCC/B-) recovered 1 point after shedding 2 points on Wednesday.

“Everything energy related still has a pretty significant bid to it,” a source said. “Oil is pushing $80 a barrel and probably is going higher. That’s giving the whole sector a lift.”

West Texas Intermediate crude oil benchmark futures for November deliveries settled the day up 87 cents at $78.30 a barrel.

Overall market tone improved sending stocks higher and Treasury yields up as the number of weekly initial and continuing unemployment claims came in lower than analysts expected on Thursday.

The iShares iBoxx High Yield Corporate Bond ETF turned positive for the first time over the week and closed up 1 cent at $87.02.

In other distressed issues active Thursday, Endo International plc’s 6% senior notes due 2028 (Caa3/CCC+) improved ¼ point.

Mallinckrodt LLC’s bonds showed signs of recovery on Thursday with the bankrupt pharmaceuticals company’s 5¾% notes due 2022 up 1½ points in secondary trading.

Talen notes gain

Talen’s 10½% senior notes due 2026 (B3/CCC/B-) recovered 1 point to 54 bid on Thursday after sliding 2 points in the prior session, a market source said.

The notes are mostly unchanged on the week.

The issue from the Woodlands, Tex., and Allentown, Pa.-based power company is down about 1point since the end of September.

Endo higher

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC+) improved ¼ point to 72¾ bid by the close on Thursday, a market source said.

The notes are trading about 1¼ points higher month to date.

Endo has announced several opioid-related lawsuit settlements across the country, including a $7.5 million agreement with the Louisiana Attorney General's office in September.

The Dublin-based pharmaceuticals maker also reported in September 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.

In July, Endo announced that subsidiaries reached a $35 million opioid-related settlement in Tennessee.

Mallinckrodt up

Mallinckrodt’s 5¾% notes due 2022 traded 1½ points better on Thursday, going out at 48½ bid, a source said.

The notes remain pressured so far in October and are trading over 15 points weaker since mid-September.

The pharmaceuticals company’s Chapter 11 bankruptcy case is winding through the U.S. Bankruptcy Court for the District of Delaware.

New York’s opioid-related lawsuit against Mallinckrodt is moving through the bankruptcy court.

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

Distressed returns down

Distressed index returns slid midweek.

The S&P U.S. High Yield Corporate Distressed Bond index total returns declined to minus 0.59% on Wednesday from 0.35% on Tuesday and 0.1% on Monday.

Month-to-date total return declines softened to minus 0.83% from minus 0.35% on Tuesday and minus 0.6% on Monday.

Year-to-date total returns fell to 29.14% on Wednesday, compared to 29.9% on Tuesday and 29.45% on at the start of the week.

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