Carvana notes edge up after stock sale; Endo under pressure; Mallinckrodt paper higher

By Cristal Cody

Tupelo, Miss., April 22 – Online car seller Carvana Co.’s senior notes traded about ½ point to 1½ points better on Friday but continue to tread near distressed levels with prices in the high 70s and low 80 handles and yields around 9%.

Carvana’s bonds saw strong secondary action after the company announced that it priced $1.25 billion of class A common stock in an offering upsized from $1 billion during the session.

The stock sale follows a loss reported midweek and ahead of a $2.2 billion acquisition the company is expected to complete in May.

Market tone sank on Friday with stocks diving and indices closing down over 2½% on growing expectations of another rate hike at the Federal Reserve’s May 3-4 monetary policy meeting, sources said.

The iShares iBoxx High Yield Corporate Bond ETF dropped 48 cents to $79.26.

Volatility jumped over 23% with the Chicago Board Options Exchange’s CBOE Volatility index going out at 27.92.

In other distressed paper, Endo International plc’s bonds were about 2 7/8 points to 3½ points lower on the week headed into the weekend following the company’s opioid-related settlement with Alabama this week.

Notes from Mallinckrodt plc, which also faces opioid-related claims from Alabama moving through bankruptcy court, were trading about ½ point to 3 points higher on the week.

Carvana higher

Carvana’s 5½% senior notes due 2027 (Caa2/CCC+) rose ½ point to 83½ bid on $14 million of volume on Friday, a source said.

The company’s 4 7/8% senior notes due 2029 (Caa2/CCC+) were quoted trading ¾ point better on the day at 77¾ bid in heavier trading action totaling $18 million.

Carvana announced the upsized stock offering on Friday.

The Phoenix-based online car retailer released first-quarter earnings on Wednesday, reporting revenue was up 56% year over year but also posting a net loss of $506 million versus a loss of $82 million a year ago.

Carvana announced on Feb. 24 that it plans to acquire the Adesa U.S. Physical Auction business from KAR Global for $2.2 billion in a transaction set to close in May.

Endo lower on week

Endo Finance LLC’s 9½% senior secured notes due 2027 (Caa2/CCC+) were up 1/8 point at 82½ bid in late afternoon trading on Friday, a market source said.

The bonds are down from 86 bid a week ago.

Endo’s 6% senior notes due 2028 (Caa3/CCC-) dropped 2 points in light trading to head out at 48½ bid.

The notes were ending the week about 2 7/8 points lower.

Alabama announced on Tuesday that Endo agreed to pay $25 million as part of a $276 million settlement the state reached with Endo, Johnson & Johnson and McKesson Corp. over opioid-related claims.

The Dublin-based pharmaceuticals maker has settled several opioid-related lawsuits in 2021 and 2022, including a $65 million settlement with Florida announced in January.

Mallinckrodt mixed

Mallinckrodt’s paper was unchanged to slightly better in thin trading action on Friday, a market source said.

The 5 5/8% notes due 2023 have been flat since Wednesday at 50½ bid.

The notes are up ½ point on the week.

The company’s 5½% senior notes due 2025 saw a ¾ point bump on Friday and headed out 3 points better on the week at 53 bid.

The Dublin- and St. Louis-based pharmaceutical company reported last week that it plans to obtain a $900 million first-lien secured term loan and a $200 million accounts-receivable-backed revolving credit facility as it nears a Chapter 11 bankruptcy exit.

Distressed returns modest

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return softened late in the week to 0.11% on Thursday, compared to 0.16% on Wednesday, zero on Tuesday and 0.44% on Monday.

Month-to-date total return losses narrowed to minus 1.1% versus minus 1.21% on Wednesday and minus 1.37% on Tuesday and Monday.

Year-to-date index returns improved to minus 6.36% on Thursday from minus 6.46% on Wednesday and minus 6.61% in the prior two sessions.

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