AMC up as stronger buyback capacity eyed; distressed pharma paper mixed; Yuzhou lower

By Cristal Cody

Tupelo, Miss., Feb. 9 – AMC Entertainment Holdings, Inc.’s notes are trading higher so far this week following the company’s new secured bond offering.

The theater owner has a stronger capacity to buy back debt than believed when it priced the 7½% first-lien senior notes due 2029 on Feb. 2, according to a report Wednesday from Covenant Review.

“After comments on last week’s marketing call for the 7½% first-lien notes there is some confusion in the market regarding how much capacity AMC has to repurchase [second-lien] notes,” the report said.

During the marketing call, a banker said AMC’s capacity to buy back second-lien notes was limited to $225 million, but after some other instruments were refinanced, the credit agreement would limit it to $300 million, the report said.

Covenant Review in collaboration with CreditSights Inc. looked at AMC’s first-lien debt documents to determine how much capacity the company has to repurchase second-lien debt.

With a “notable deviation in wording from previous first-lien note documents, as well as some generous basket changes, the company has maintained significant flexibility to repurchase the second-lien notes in full,” according to the report.

“We believe that, despite the amounts referenced on the marketing call, the company should have the ability, although not necessarily the willingness, to repurchase all outstanding 2nd-lien notes with the more than $1.5 billion of cash on hand as of December 31, 2021 while staying in compliance with the new notes and credit agreement,” Covenant Review said.

Elsewhere, distressed pharmaceutical bonds traded flat to higher on Wednesday with the space seeing overall light secondary supply.

Endo International plc’s 6% senior notes due 2028 (Caa3/CCC-) jumped about 2 points in early trading and held on to 1 point by the close.

Mallinckrodt plc’s bonds were trading mostly flat to slightly weaker since a bankruptcy court confirmed the company’s reorganization plan in the prior week.

Notes from Lannett Co., Inc. were quiet on Wednesday in the secondary market after S&P Global Ratings downgraded the generic pharmaceutical manufacturer.

Overall market tone swung higher on Wednesday with the Chicago Board Options Exchange’s CBOE Volatility index back below 20. The index declined 6.9% to reach 19.96 by the close.

Stocks climbed with the Nasdaq finishing the day up 2.08% and enthusiasm spreading to the junk space.

The iShares iBoxx High Yield Corporate Bond ETF improved 44 cents, or 0.53%, to $84.06.

Oil also improved after dropping nearly $2 per barrel in the prior session.

West Texas Intermediate crude oil benchmark futures for March deliveries rose 30 cents to settle at $89.66 a barrel.

Looking at China’s distressed property space, Yuzhou Group Holdings Co. Ltd.'s paper slipped further on Wednesday after the company was dropped to restricted default by Fitch Ratings following an exchange offer.

AMC paper mixed

AMC’s 10% senior secured second-lien notes due 2026 (Caa3/CCC-) added ¾ point to trade at 94¼ bid by late Wednesday, a market source said.

The notes have picked up 1¼ points since Friday.

AMC’s 5¾% senior subordinated notes due 2025 (Ca/CCC-) were quoted at 78 bid, up about ¼ point on the day and 2½ points on the week.

The Leawood, Kan.-based movie theater owner sold an upsized $950 million of the 7½% first-lien notes due 2029 at par a week ago with proceeds slated to redeem the $500 million outstanding of its 10½% senior secured first-lien notes due 2025.

Endo notes gain

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC-) jumped about 2 points in early trading and held on to a 1-point gain by the close to head out at 67½ bid, a market source said.

The notes are down about ½ point since the end of January.

Endo International plans to release its fourth-quarter and fiscal 2021 earnings results on Feb. 28.

The Dublin-based pharmaceuticals maker announced in January that it reached a $65 million opioid-related settlement with Florida.

In 2021, Endo reported opioid-related settlements that included a $35 million settlement in Tennessee, a $7.5 million settlement with the Louisiana Attorney General's office and a $50 million agreement to settle three opioid-related cases in New York.

Mallinckrodt little changed

Mallinckrodt’s 5½% senior notes due 2025 were trading ¼ point lower on the week at 54½ bid on Wednesday on light secondary volume, a source said.

The Dublin- and St. Louis-based pharmaceutical company’s 4¾% senior notes due 2023 traded mostly unchanged at the 40 bid range over the day.

Mallinckrodt announced on Feb. 3 that its Chapter 11 bankruptcy reorganization plan was confirmed by the U.S. Bankruptcy Court for the District of Delaware and includes settlements that resolve any opioid-related lawsuit claims.

The pharmaceuticals maker filed an amended Chapter 11 plan and first amended joint plan of reorganization in 2021 after first filing on Oct. 12, 2020.

Lannett lower in February

Lannett’s bonds were quiet during the session with the 7¾% senior secured notes due 2026 (B3/B-) last seen trading on Monday at 63 bid, down from the 78 bid area in the prior week, a source reported.

S&P said Wednesday it dropped the issuer to CCC+ from B- and lowered the senior secured debt ratings to B- from B with the view that its capital structure is unsustainable over the long term.

The Philadelphia-based generic pharmaceutical manufacturer faces a revenue decline of 25% to 30% in fiscal 2022 amid a competitive pricing environment, S&P said.

Yuzhou bonds down

The bulk of Yuzhou Group’s paper was quiet during the session with issues thinly traded in January and month to date, a market source reported.

Yuzhou Properties Co. Ltd.’s 7.7% senior notes due 2025 (Caa3//C) fell about 1¾ points to the 18¾ bid area on Wednesday.

During the session, Fitch said it dropped Yuzhou Group to RD from C on the Jan. 20 completion of an exchange offer but affirmed the C rating on the company’s senior notes.

The Shanghai and Shenzhen, China-based property developer exchanged $477 million of two offshore bonds due Jan. 23 and Jan. 25 with $242 million and $340 million of principal outstanding, respectively, into CNY 453 million of new 7.8125% notes due January 2023.

Yuzhou Group has restarted the exchange offer for the 6% senior notes due 2022 and the 8 5/8% senior notes due 2022 in an offer set to expire on Feb. 18.

Distressed index down

Distressed returns were lower in the prior session.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total return fell to minus 0.14% on Tuesday from 0.38% at the start of the week.

Month-to-date total returns softened to 0.15% compared to 0.29% on Monday.

Year-to-date returns slipped to minus 1.38% from minus 1.24% at the week’s start.

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