Endo bonds drop; Mallinckrodt paper declines to 30s handle; Artera Services improves

By Cristal Cody

Tupelo, Miss., May 24 – Endo International plc’s bonds dropped ½ point to ¾ point on Tuesday in a busy session as potential restructuring reports for the opioid manufacturer continue.

S&P Global Ratings downgraded the issuer on Friday on increased restructuring risks.

Paper from bankrupt pharmaceutical maker Mallinckrodt plc has been little traded in May but moved Tuesday down nearly 20 points to a 30s handle.

Market tone was mixed with stocks mostly weaker, while some distressed paper picked up points during the session.

The iShares iBoxx High Yield Corporate Bond ETF finished 46 cents higher at $77.22.

Secured bonds from Artera Services LLC, formerly known as PowerTeam Services LLC, were lifted 1 5/8 points in steady trading.

Corporate distressed bond index returns also improved on Monday.

Meanwhile, defaults are at a multi-year low, S&P said in a report on Tuesday.

The 2022 global corporate default tally was unchanged at 31 over the past week, S&P said.

“The total is at its lowest year-to-date level since 2014,” Nicole Serino, of S&P Global Credit Markets Research, said in the release. “However, risks to credit conditions are increasing, including persistent inflation, lower growth forecasts, and rising financing costs.”

S&P said it expects both the U.S. and European 12-month-trailing speculative-grade default rates to rise to 3% by March 2023 from 1.4% and 0.7%, respectively, as of March 2022.

Endo trades lower

Endo subsidiary Par Pharmaceutical Inc.’s 7½% senior secured notes due 2027 (B3/CCC) were quoted Tuesday trading off ½ point at 77 bid on $13 million of paper changing hands, a market source said.

Endo Luxembourg Finance Co. Sarl’s 6 1/8% senior secured first-lien notes due 2029 (B3/CCC) dropped ¾ point to 75 bid by late afternoon on $14 million of volume.

Endo International’s paper has been under pressure this month since the company recorded a first-quarter loss and provided limited financial guidance.

The company projects a second-quarter loss from continuing operations of 15 cents to 17 cents a share on $500 million to $525 million of revenue.

S&P downgraded the company and lowered the ratings on its term loan and notes on Friday.

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

Mallinckrodt softens

Mallinckrodt’s 5½% senior notes due 2025 were quoted at 35¼ bid by the close on Tuesday, nearly 20 points weaker than where the issue was last seen, a source said.

The bonds have been thinly traded in May and were last active at the start of the month at the 52½ bid range.

Mallinckrodt’s 5 5/8% notes due 2023 also traded at 35 bid to 35¼ bid over Tuesday’s session.

The issue was last seen at the start of the month trading at the 52½ bid area.

The Dublin- and St. Louis-based pharmaceutical company is working toward exiting Chapter 11 bankruptcy.

The company reported plans on Friday to issue $650 million of new 11½% 6.5-year first-lien senior secured notes before the effective date of its plan of reorganization.

Artera higher

Also Tuesday, Artera’s 9.033% senior secured first-lien notes due 2025 (B3/B-) improved 1 5/8 points on $6 million of paper traded, a market source said.

The bonds were quoted going out at 76 5/8 bid.

On Monday, S&P revised the company’s outlook to negative from stable on higher-than-expected debt leverage.

Moody’s changed the company’s outlook to negative from stable also this month.

Artera is an Atlanta-based provider of infrastructure services to the natural gas and electric industries in 41 states.

Distressed returns up

The S&P U.S. High Yield Corporate Distressed Bond index improved on Monday.

One-day total returns rose to 0.19% at the start of the week, up from 0.12% on Friday and improved from minus 0.13% in the same session a week ago.

Month-to-date total returns rose to minus 9.52% on Monday versus minus 9.69% ahead of the weekend and minus 8.04% in the week-ago session.

Year-to-date index returns on Monday were minus 16.66%, compared to minus 16.82% on Friday and minus 15.29% the same day last week.

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