Talen notes trade mixed; Transocean up; Endo dips; distressed traders await ‘pain’

By Cristal Cody

Tupelo, Miss., March 25 – Distressed bond secondary trading remained fairly active on Friday as the financial markets ended mostly softer.

Talen Energy Supply LLC’s senior secured and unsecured notes were busy with “$59 million traded across the board,” a source said.

The paper was flat to about ¼ point higher and ending the week about 3 points better.

Transocean Inc.’s notes were up about 7/8 point to over 1 point as oil prices finished higher.

West Texas Intermediate crude oil benchmark futures for May delivery settled up $1.56 to $113.90 a barrel.

The markets were a “bit tricky” during the session, a source said. “It was softer. The indexes are down.”

The iShares iBoxx High Yield Corporate Bond ETF closed off 59 cents to $81.32.

Market volatility retreated with the Chicago Board Options Exchange’s CBOE Volatility index 3.97% lower at 20.81.

In the distressed pharmaceuticals space, Endo International plc’s notes were mostly weaker.

Mallinckrodt plc’s paper went out mostly unchanged after steady trading action on Friday.

Elsewhere, the 7 7/8% senior notes due Oct. 1, 2022 (C/C) from Midas Intermediate Holdco II LLC, doing business as Service King, were quiet after rallying about 6¾ points on Thursday.

“People are not doing much,” a trader said as the week closed. “Some guys are just waiting with all the movement in interest rates. The distressed guys are waiting for pain.”

Others have “migrated to direct lending or private debt,” the trader said. “Some guys have been looking at where the pain is – Ukraine, Russia.”

Talen flat to higher

Talen’s paper traded flat to about ¼ point higher on Friday with over $59 million of volume seen in the company’s unsecured and secured issues, a source said.

Talen’s 6½% senior notes due 2025 (Caa2/CCC/CCC) went out flat at 31 bid on about $16.9 million of secondary supply.

The issue recovered about 3 points over the week after declining about 4½ points in the previous week.

Talen’s 10½% senior notes due 2026 (Caa2/CCC/CCC) traded ¼ point better on Friday at 31¾ bid on over $12.7 million of volume.

The Woodlands, Tex., and Allentown, Pa.-based power company’s notes were about 3 points stronger on the week after softening about 8¼ points in the prior week.

Transocean trades up

Transocean’s 7½% senior notes due 2026 (Ca/CCC) improved 7/8 point to 84 7/8 bid by the end of the day on over $3.64 million of paper changing hands, a market source said.

Secondary action was heavier in the Vernier, Switzerland-based offshore driller’s 8% debentures due 2027 (Ca/CCC+) during the session with about $9.5 million of volume.

The notes were up over 1 point at the 85½ bid area by the close.

Endo notes lower

Endo Finance LLC’s paper was ending Friday mostly lower with the 6% senior notes due 2028 (Caa3/CCC-) at 56 bid, about ¼ point softer on the day and down 1 7/8 points on the week, a source said.

Endo’s 9½% senior secured notes due 2027 (Caa2/CCC+) rose about ¼ point in thin activity to trade near the 87½ bid area.

The Dublin-based pharmaceuticals maker’s secured notes were about 1½ points softer on the week.

Mallinckrodt active

Mallinckrodt’s paper saw steady secondary interest on Friday but went out mostly flat, a source said.

The company’s 5½% senior notes due 2025 were unchanged at 49¼ bid on volume totaling more than $12 million.

Mallinckrodt’s 5 5/8% notes due 2023 also were quoted trading at 49¾ bid on over $10.7 million of secondary supply.

The Dublin- and St. Louis-based pharmaceutical company is moving toward exiting Chapter 11 bankruptcy after its reorganization plan was confirmed in February.

Midas bonds quiet

Midas Intermediate Holdco II’s 7 7/8% senior notes due Oct. 1, 2022 (C/CC) were last seen in the secondary market on Thursday at 96¾ bid, up 6¾ points from where the issue last traded in mid-March, a market source said.

The notes from the company, doing business as Service King, traded as low as 60 bid in February.

S&P Global Ratings downgraded the issuer and the paper on March 8, citing a strong likelihood of a default or a distressed debt exchange as the company faces at least $241 million of debt to refinance before July 1.

The Richardson, Tex.-based auto body repair provider is majority-owned by Blackstone Group LP.

Distressed index drops

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return turned negative on Thursday.

The one-day total return fell to minus 0.19%, compared to 0.21% on Wednesday, 0.46% on Tuesday and 0.08% on Monday.

Month-to-date total returns softened to minus 2.57% from minus 2.38% on Wednesday, minus 2.59% on Tuesday and minus 3.04% on Monday.

Year-to-date index returns declined to minus 5.84% versus minus 5.65% on Wednesday, minus 5.85% on Tuesday and minus 6.29% at the week’s start.

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