Endo secured notes sink in heavy secondary supply; Mallinckrodt softens; Diamond Sports mixed

By Cristal Cody

Tupelo, Miss., March 11 – The distressed pharmaceuticals space saw the heaviest secondary action over Friday’s session.

The day’s supply was led by $48 million of volume in Endo International plc’s 9½% senior secured notes due 2027 (Caa2/CCC+).

The issue sank 4½ points and was nearly 10 points lower on the week.

Bonds in the distressed pharmaceuticals space have been soft after a $6 billion opioid-related settlement was approved with Purdue Pharma owners on Wednesday.

Mallinckrodt plc’s paper also declined Friday following the company’s agreement earlier in the week to settle Medicaid violations for $260 million.

Market tone remained soft headed into the weekend as the Russian invasion of Ukraine continues to impact global markets.

The iShares iBoxx High Yield Corporate Bond ETF closed off 59 cents to $80.93.

Oil pushed back after declining $15 midweek and rose over $3 on Friday.

West Texas Intermediate crude oil benchmark futures for April deliveries, which declined $15 on Wednesday and dropped $2.68 on Thursday, settled Friday up $3.31 at $109.33 a barrel.

Diamond Sports Group LLC’s notes were flat to ¼ point softer Friday and trading about 1/8 point to 1¼ points lower on the week.

Endo declines

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC-) slid 2½ points to 55½ bid by the end of the day in trading totaling over $10.5 million, a source said.

The notes were going out about 7¾ points lower on the week.

Endo’s 9½% senior secured notes due 2027 (Caa2/CCC+) sank 4½ points to just under 87 bid in heavier secondary supply of $48 million Friday.

On Thursday, the notes were down 1½ points on over $47 million of volume.

The Dublin-based pharmaceuticals maker’s secured notes ended the prior week at the 95 bid range.

Mallinckrodt lower

Mallinckrodt’s paper was mostly softer in thin trading over Friday’s session, a source said.

The 5½% senior notes due 2025 went out at 49 bid, 2 points lower on the week.

The 4¾% senior notes due 2023 were last seen Wednesday at 37½ bid, about ½ point softer this week.

The company’s paper has been thinly traded as it moves toward exiting Chapter 11 bankruptcy.

Mallinckrodt’s reorganization plan that resolves all opioid-related lawsuits against the Dublin- and St. Louis-based pharmaceutical company was confirmed in February.

The Justice Department announced Monday the company agreed to pay $260 million to resolve allegations of Medicaid violations.

Diamond Sports soften

Diamond Sports’ 6 5/8% senior unsecured notes due 2027 (Ca/CC) fell ¼ point to 22½ bid by the day’s end, a source said.

The issue was about 1¼ points softer from a week ago.

Diamond Sports’ 5 3/8% second-lien secured notes due 2026 (Caa3/CC) went out flat at 40 7/8 bid Friday, an 1/8 point down on the week.

Diamond Sports’ parent Sinclair Broadcast Group Inc. announced on March 1 the company completed its new money financing transaction and debt exchange of term loans and notes, which included exchanging the 5 3/8% notes for its 5 3/8% senior secured notes due 2026.

S&P Global Ratings said Monday it plans to lower the company’s issuer rating to SD after the exchange offer’s final completion date on March 14 based on the view the transactions are tantamount to a default. However, S&P said it will likely then raise it to CCC+ to reflect the company’s enhanced liquidity following the transactions.

Distressed returns slide

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return declined Thursday to negative 0.72%, compared to 0.05% on Wednesday, negative 0.59% on Tuesday and negative 0.2% on Monday.

Month-to-date total returns softened to negative 2.48% from negative 1.76% on Wednesday, negative 1.81% on Tuesday and negative 1.23% at the week’s start.

Year-to-date index returns dropped to negative 5.74% on Thursday, compared to negative 5.05% on Wednesday, negative 5.1% on Tuesday and negative 4.54% on Monday.

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