Transocean notes decline as oil sinks; Endo, Mallinckrodt edge higher; Exela mostly flat

By Cristal Cody

Tupelo, Miss., Nov. 3 – High-grade and junk primary and secondary activity slowed on Wednesday with the focus on the Federal Reserve’s monetary policy announcement.

“Everything was kind of at a halt because of that,” a source said. “Everyone was just waiting, and now they’ve said they’re going to taper starting in November, December, so tomorrow should pick up. We do have a couple of things we’re looking at that should be pricing this week.”

The Federal Open Market Committee left the Federal Funds rate unchanged at zero to ¼% and announced it will start tapering the government’s bond purchases by $10 billion for Treasuries and $5 billion for agency mortgage-backed securities per month.

In November, the Federal Reserve said it will purchase at least $70 billion of Treasuries and at least $35 billion of agencies. In December, the Fed will buy at least $60 billion of Treasuries and at least $30 billion of agencies, with a similar reduction of asset purchases expected each following month.

Market tone was mostly stronger as volatility waned following the Fed’s report, while oil plunged about $3 a barrel.

The iShares iBoxx High Yield Corporate Bond ETF added 17 cents to close at $86.94.

West Texas Intermediate crude oil benchmark futures for December deliveries sank $3.05 to settle at $80.86 a barrel.

Energy names saw a “little bit of movement” on Wednesday on the drop in oil prices, a source said.

Transocean Inc.’s notes declined in light secondary supply.

In the pharmaceuticals space, Endo International plc’s notes edged higher after rallying 2 points to 4 points on Tuesday following a California state court win in an opioid-related lawsuit.

“Endo moved a lot yesterday because of the California trial results,” a source noted. “Today, it’s kind of calmed down. The second liens aren’t moving as much as the unsecureds.”

Mallinckrodt plc’s paper “kind of followed the sector’s response to the California rejection of the opioid case,” the source said.

The company’s 5¾% notes due 2022 added 1 3/8 points after picking up 3 7/8 points on Tuesday.

In other distressed paper, Exela Technologies, Inc.’s notes were mostly unchanged on Wednesday following the company’s downgrade.

Transocean mostly soft

Transocean’s 7½% notes due 2026 (Ca/CCC+) were down about 1½ points at the 78½ bid area in thin trading on Wednesday.

“It opened today around 80 3/8,” a source said. “The last trade we saw was 78½, so it’s down, but there’s not a lot of trading.”

Transocean’s 11½% senior notes due 2027 (Caa3/CCC+) were trading mostly flat around 103 bid.

“They opened this morning at 103¼, and their week high was around 104, so there’s not a crazy amount of movement,” the source said.

On Monday, the Vernier, Switzerland-based offshore driller posted a third-quarter loss of $130 million for the period ended Sept. 30.

Endo edges up

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC-) improved more than ½ point to trade near the 75 bid area on Wednesday after rallying 4 points in the prior session, a source said.

The issue is about 5¼ points higher on the week.

Endo Finance’s 9½% senior secured notes due 2027 (Caa2/CCC-) were unchanged to slightly softer at the 101½ bid area after improving 2 points to 101 3/8 bid on Tuesday.

Endo announced Tuesday that a California state trial ruled that subsidiaries Endo Health Solutions Inc. and Endo Pharmaceuticals Inc. are not liable for opioid-related claims.

The Dublin-based pharmaceuticals maker reportedly settled an Alabama lawsuit in October, as well as reached agreements to settle opioid-related lawsuits in Louisiana and New York in September and in Tennessee in July.

Mallinckrodt improves

Mallinckrodt’s paper continued to climb on Wednesday with the company’s 5¾% notes due 2022 up 1 3/8 points at 48 bid, a source said.

The notes jumped 3 7/8 points on Tuesday.

On Tuesday, Mallinckrodt reported the company had a third-quarter loss of $263.7 million, compared to a profit of $191.6 million in the same period last year.

The pharmaceuticals maker also faces opioid-related lawsuits that are moving through bankruptcy court.

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

Exela notes steady

Exela Technologies’ paper was mostly unchanged on Wednesday, according to market sources.

Debt issuer Exela Intermediate LLC’s 10% senior secured first-lien notes due 2023 (Caa3/D) were quoted at the 82½, 83 area.

Exela’s bonds “haven’t even traded that much today,” a source said. “They’ve been around 83¾, 84 the past couple of days.”

The bonds remain stronger than where the issue traded over the summer at the 43½ bid range.

S&P Global Ratings downgraded the company to SD from CCC- and its senior notes and term loan to D from CCC- on Tuesday after the company announced a tender offer.

Exela is offering $900 in cash per $1,000 principal of term loans or notes in a maximum cash tender offer of $225 million that expires Nov. 24.

Any tendered loans and notes not accepted for cash will be exchanged into new 11½% notes due 2026.

Exela has purchased about $95 million of debt in the open market so far this year, S&P said.

The Irving, Tex.-based software and services company also has conducted at-the-market equity offerings, including a $250 million offering on Sept. 30 and a $100 million offering on June 30.

Distressed returns gain

Distressed index returns improved over the second session of November.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return rose to 0.23% on Tuesday from minus 0.05% on Monday.

Month-to-date total returns rose to 0.18% from minus 0.05%.

Year-to-date total returns were higher Tuesday at 29.26%, compared to 28.97% on Monday.

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