Carvana paper flirts with distressed space; Endo under pressure; Mallinckrodt softens

By Cristal Cody

Tupelo, Miss., April 28 – Carvana Co.’s new and existing notes dominated the secondary market on Thursday with the paper attracting attention in the distressed space on yields of over 9½%.

Carvana’s notes shed about ½ point to 1 1/8 points in heavy secondary action following the company’s upsized bond deal on Wednesday, sources said.

The online car retailer’s existing bonds traded with handles in the mid-70s to low 80s and yields nearing 10% by the end of the day.

Carvana’s new 10¼% notes due 2030 (Caa2/CCC) were quoted down 1 point at 99 bid and yielding 10.438% on hefty trading action that hit $219 million on Thursday.

“The current 29s are the fair value at a similar yield,” a source said. “Why would you pay for that? The coupon is good at 10¼%, but it needed to come with an original issue discount, and it didn’t, and now we’re seeing it trade down around the break.”

The financial markets finished on the upswing with stocks higher following a busy round of quarterly earnings releases and dividend reports released over Thursday’s session.

The iShares iBoxx High Yield Corporate Bond ETF turned positive, trading up 44 cents to $79.51.

The Chicago Board Options Exchange’s CBOE Volatility index dropped below 30 with the index off 5.09% at 29.99.

Overall action in distressed issues remained light on Thursday, according to market sources.

“Very quiet,” one source said.

Distressed pharmaceutical paper was active in thin trading, sources reported.

Endo International plc’s 6% senior notes due 2028 (Caa3/CCC-) were down 3 points.

Mallinckrodt plc’s paper softened but “not a lot of movement” was seen as the company cleared another hurdle to exit Chapter 11 bankruptcy, a source said.

Carvana notes drop

Carvana’s paper shed about ½ point to 1 1/8 points in heavy secondary action following the company’s upsized bond deal on Wednesday, sources said.

The company’s 4 7/8% senior notes due 2029 (Caa2/CCC+) fell 1 point to 75¾ bid and a 9.547% yield on $25 million of volume on Thursday.

Carvana’s 5 7/8% notes due 2028 (Caa2/CCC+) were quoted at 81½ bid, down 1 1/8 points on $21 million of paper changing hands. The yield was 9.829%.

The company’s 5½% senior notes due 2027 (Caa2/CCC+) also slipped ½ point to head out at 82¾ bid and a 9.999% yield on $16 million of paper traded.

In addition to the $3.275 billion bond offering on Wednesday, Carvana last week sold $1.25 billion of class A common stock.

The Phoenix-based online car retailer reported Thursday that it dropped a planned offering of series A perpetual preferred stock since the bond deal was upsized.

Endo notes sink

Endo Finance LLC’s 6% senior notes due 2028 (Caa3/CCC-) were under pressure with the notes seen down 3 points on Thursday, a source reported.

Endo’s bonds were quoted at 44½ bid in light trading volume totaling $2 million.

The Dublin-based pharmaceuticals maker has settled several opioid-related lawsuits this year, including with Alabama, San Francisco and Florida.

Mallinckrodt softens

Mallinckrodt’s 5¾% notes due 2022 traded around 52¼ bid on Thursday, down about ½ point on the day, sources said.

The company’s 10% bonds due 2025 moved at 105 1/8 bid by the close.

The Dublin- and St. Louis-based pharmaceutical company is preparing to exit Chapter 11 bankruptcy after securing approval on Wednesday from the High Court of Ireland and approval in March from the U.S. Bankruptcy Court.

Distressed index declines

S&P U.S. High Yield Corporate Distressed Bond index returns softened in Wednesday’s session with one-day total returns at minus 0.22%, compared to 0.14% on Tuesday and minus 0.52% on Monday.

Month-to-date total returns declined to minus 2.07% by mid-week versus minus 1.85% on Tuesday and minus 2% at the week’s start.

Year-to-date index returns fell to minus 7.28% on Wednesday from minus 7.07% on Tuesday and minus 7.21% on Monday.

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