Diamond Sports notes higher; Endo edges down; Mallinckrodt up; Kaisa, Evergrande soften

By Cristal Cody

Tupelo, Miss., Nov. 10 – Diamond Sports Group LLC’s bonds rallied another 2 points in trading on Wednesday with the paper higher following parent Sinclair Broadcast Group Inc.’s announcement that it had taken on a portion of the company’s debt.

“The whole structure's up,” a source said.

Diamond Sports is among issuers eyed as candidates for distressed debt exchanges before the end of the year that could result in $4 billion of incremental default volume, according to Fitch Ratings on Wednesday.

Other issuers include Talen Energy Supply LLC, while Exela Technologies, Inc. announced an exchange offer that is expected to close Nov. 24.

Default volume remains at a record low with no reported defaults since the end of July, Fitch said.

“The 102-day stretch without a default is the longest in 14 years, though the streak appears to have an end in sight with Carlson Travel Inc.'s bankruptcy,” Fitch said.

Tone was soft across the financial markets on Wednesday with stocks and bonds lower and measured market volatility up more than 5%.

The iShares iBoxx High Yield Corporate Bond ETF dove 49 cents to $86.96.

The Chicago Board Options Exchange’s CBOE Volatility index climbed 5.85% by the close to 18.82.

Oil slid over $2 with Brent crude futures down $2.14.

West Texas Intermediate crude oil benchmark futures for December deliveries dropped $2.81 to settle at $81.34 a barrel.

The junk space was a “little bit weak” ahead of the Veterans Day holiday, a source said.

Secondary action was mostly concentrated in new issues.

“Some of these new issues were not doing too hot,” a market source said. “They were down ½ point out of the chute on a combo of Treasuries weren’t great, no session tomorrow and the CPI number this morning. Stocks took a hit and bonds were down anywhere from ½ point on new issues to 2, 3 points.”

The Consumer Price Index jumped 6.2% for the 12 months ending in October, compared to expectations of 5.9%. The Bureau of Labor Statistics reported it is the largest 12-month increase since November 1990.

Trading was light in “opioid names” following Tuesday’s ruling from Oklahoma’s Supreme Court that tossed out a $465 million opioid-claim related verdict against Johnson & Johnson, a source said.

The ruling follows last week’s California court verdict that shields Endo International plc from opioid-related liabilities in the state.

Endo International’s 6% notes were down ¼ point.

Mallinckrodt plc’s 5¾% senior notes improved about ¼ point.

Looking at China property developers, Kaisa Group Holdings Ltd.’s paper remained weak following a downgrade from Moody’s Investors Service on the heels of a missed debt payment.

The sector has been pressured with other missed debt payments from issuers including China Evergrande Group in September and Fantasia Holdings Group Co. Ltd. and Modern Land (China) Co., Ltd. in October.

Evergrande’s paper was mixed with the 8¾% senior notes due 2025 (C/C/C) down ½ point at 24½ bid as the Shenzhen, China-based real estate developer reportedly made a bond payment on Wednesday.

“They’re wrapped around 25,” a source said of the company’s paper, “about a point or 2 better on the whole curve.”

Diamond Sports gains

Diamond Sports’ paper rallied another 2 points on Wednesday, a source said.

The company’s 6 5/8% senior notes due 2027 (Ca/CC) climbed 2 points to 32 bid.

The notes have added about 6½ points week to date.

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) traded up another 2 points to 56 bid during the session.

The notes are up about 3¼ points on the week.

The company’s paper has improved since Sinclair announced on Monday that it has purchased and assumed the lenders rights and obligations for approximately $184.4 million under Diamond Sports’ existing accounts receivable securitization facility.

Sinclair reported in October that it has continued to seek new funding for the Chesapeake, Va.-based sports broadcast group unit.

Endo dips; Mallinckrodt up

Opioid-related names were mixed in light secondary action on Wednesday, sources said.

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC-) were down ¼ point at 76 3/8 bid.

The Dublin-based pharmaceutical maker’s bonds have improved more than 5 points since a California state trial ruled in the prior week that its subsidiaries are not liable for opioid-related claims.

Mallinckrodt’s bonds edged higher after ending the previous day down 1¼ points.

The Dublin- and St. Louis-based bankrupt pharmaceutical maker’s 5¾% senior notes rose about ¼ point to 57½ bid.

Kaisa trades lower

Kaisa’s 11½% senior notes due 2023 (C//CCC-) fell about 1½ points to 28½ bid over the day, a source said.

Trading quieted on Wednesday in Kaisa’s 9 3/8% senior notes due 2024 (C//CCC-) after the paper dropped 2 points to 28½ bid on Tuesday.

Moody’s downgraded the issuer on Wednesday, while Fitch Ratings downgraded Kaisa on Tuesday based on deteriorating liquidity and weak recovery prospects for creditors following a subsidiary’s missed payment on onshore wealth management products.

The Shenzhen, China-based real estate developer also faces $400 million of bonds due in December.

Distressed index positive

Distressed index returns stayed positive on Tuesday.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return was 0.18%, down from 0.73% on Monday.

Month-to-date total returns were higher at 0.99% versus 0.81% on Monday.

Year-to-date total returns rose to 30.3% from 30.07% at the start of the week.

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