Distressed pharma bonds mixed; Mallinckrodt up; Endo flat to higher; Lannett soft

By Cristal Cody

Tupelo, Miss., March 3 – Bonds from distressed pharmaceutical manufacturers saw mixed activity on Thursday following the announcement of a new settlement with Purdue Pharma owners to resolve opioid-related claims.

The settlement with members of the Sackler family and eight states and the District of Columbia follows after an earlier settlement was overturned on appeal in December.

A hearing on a motion to authorize and approve the new settlement term sheet will be held March 9 in the U.S. Bankruptcy Court for the Southern District of New York.

Purdue Pharma filed for Chapter 11 bankruptcy on Sept. 15, 2019.

Mallinckrodt plc’s bonds stayed to the sidelines during the session as the company prepares to exit Chapter 11 after gaining approval in February of its reorganization plan that resolves all opioid-related lawsuits.

The company’s 4¾% senior notes due 2023 were last seen trading on Wednesday 2 points better.

Endo International plc’s notes traded flat to about 1¼ points better on Thursday.

Generic pharmaceutical manufacturer Lannett Co., Inc.’s 7¾% senior secured notes due 2026 (B3/B-) were quoted 2¼ points softer this week.

Overall market tone remained weak on Thursday with the Nasdaq down 1.56%.

The iShares iBoxx High Yield Corporate Bond ETF closed off 25 cents at $83.08.

Measured market volatility was mostly flat on the day but remained high.

The Chicago Board Options Exchange’s CBOE Volatility index fell 0.85% to 30.48.

The ‘Fear Factor’ index was below 20 in early February.

Oil retreated slightly after soaring past $100 per barrel in the front half of the week in the volatility surrounding Russia’s invasion of Ukraine.

West Texas Intermediate crude oil benchmark futures for April deliveries settled Thursday $2.93 lower at $107.67 a barrel.

Mallinckrodt quiet

Mallinckrodt’s 4¾% senior notes due 2023 were last seen trading on Wednesday about 2 points better on the day and week at 40½ bid, a source said.

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 opioid-related lawsuit claims it faces across 38 states and territories.

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.

Endo unsecureds gain

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC-) improved about 1¼ points to 64 bid during the session, a source said.

The issue has softened about 3 points so far in the week.

Endo’s 9½% senior secured notes due 2027 (Caa2/CCC+) were mostly unchanged at the 96 bid range over the day.

The secured notes are trading about 1½ points softer from the prior week.

Endo’s bonds declined following a weak fourth-quarter earnings report on Monday.

In February, the Dublin-based pharmaceuticals maker reported it expected a Tennessee state court to issue a default judgment regarding opioid-related claims it faces in 13 counties with a damages trial anticipated in April 2023.

Endo reported in January it reached a $65 million opioid-related settlement with Florida.

In 2021, the company announced 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.

Lannett softens

Lannett’s 7¾% senior secured notes due 2026 (B3/B-) traded at 50½ bid to 50¼ bid in light volume on Thursday, a source said.

The notes were about 2¼ points lower on the week.

The bonds have dropped from the 78 bid range a month ago.

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

Distressed bond index up

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return improved Wednesday to 0.23% versus minus 1.04% on Tuesday and 0.07% on Monday.

Month-to-date total returns were minus 0.81% on Wednesday, compared to minus 0.97% on Tuesday and minus 1.85% at the start of the week.

Year-to-date index returns totaled minus 4.13% on Wednesday, minus 4.36% on Tuesday and minus 3.35% on Monday.

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