Endo notes mixed on potential bankruptcy; Bausch declines; CHS softens; Avaya drops

By Cristal Cody

Tupelo, Miss., Aug. 9 – Endo International plc’s paper mostly gained on Tuesday after the company reported steep second-quarter losses and a potential Chapter 11 bankruptcy filing.

Endo announced a second-quarter loss of $1.89 billion, or $8 per share, compared to a loss of $15.5 million, or 4 cents a share, in the same period last year.

Endo reported in its 10-K filing on Tuesday with the Securities and Exchange Commission that it expects to seek protection under Chapter 11, “which could occur imminently.”

The distressed health care space is expanding with issuers including Endo, Bausch Health Cos. Inc., Lannett Co., Inc. and Envision Healthcare Corp. filling out a default watchlist, according to a BofA Securities Inc. research note on Friday.

Bausch’s senior notes (B3/B-/B) traded about 1/8 point to 1 5/8 points weaker on Tuesday after the pharmaceutical company reported lower second-quarter losses.

Envision Healthcare’s 8¾% senior notes due 2026 (Ca/CC) have been quiet so far this week after ending the prior week mostly flat at 33½ bid, a source said.

Also in the distressed health care space, Community Health Systems Inc.’s notes gave back about ½ point to ¾ point on Tuesday after picking up 2 points the previous day.

Market tone overall was weak on Tuesday with stock indices down ahead of July inflation data due Wednesday.

In June, the Consumer Price Index jumped 9.1%.

The iShares iBoxx High Yield Corporate Bond ETF declined 56 cents, or 0.72%, to $77.55 on Tuesday.

The CBOE Volatility index rose 2.4% to 21.80.

In other distressed paper trading heavily on Tuesday, Avaya Holdings Corp.’s 6 1/8% senior notes due 2028 (B3/CCC) reacted negatively after the company reported additional weak preliminary third-quarter results.

The notes slid 7¼ points to 49 bid and yielding about 21½%, a source said.

Volume was strong on over $20 million paper changing hands.

Endo mostly up

Endo’s bonds went out mixed on Tuesday following the company’s weak earnings report and possible bankruptcy announcement, a source said.

Endo subsidiary Par Pharmaceutical Inc.’s 7½% senior secured first-lien notes due 2027 (Caa2/CC) were among the company’s most active issues trading Tuesday with $16 million of volume. The notes went out at 82½ bid, up 1¼ points from Monday.

Endo Luxembourg Finance Co. Sarl’s 6 1/8% senior secured first-lien notes due 2029 (Caa2/CC) rose 1¼ points to 82¼ bid by the close on $7 million of trading.

Endo Finance LLC’s 6% senior notes due 2028 (C/C) also picked up 5/8 point over the day to head out at 6 1/8 bid.

The company’s 9½% senior secured second-lien notes due 2027 (Ca/C) meanwhile were quoted at 23 bid, down 1¾ points from Monday.

Endo reported in July that it paid off a $38 million interest payment that it skipped in June on its 6% notes due 2028 but planned to miss a $45 million payment on its 9½% senior secured second-lien notes due 2027 and $600,000 due on its 6% senior notes due 2025.

Endo remains in a 30-day grace period that expires on Aug. 14 after missing the $1.9 million payment due July 15 on its 5 3/8% senior notes due 2023.

Endo reported Tuesday second-quarter revenue was down 20%, and it has faced “thousands of governmental and private plaintiffs” alleging opioid-related claims.

The Dublin-based pharmaceuticals company settled several opioid-related lawsuits in 2021 and 2022, including a $65 million settlement with Florida announced in January, but said Tuesday it has “not been able to settle most of the opioid claims” and is exploring potential actions.

Bausch notes soften

Bausch Health paper traded mostly weaker on Tuesday following the company’s second-quarter earnings release, a source said.

The 4 7/8% senior secured notes due 2028 (B2/B/BB) softened 1 point to 76 bid on $10 million of paper traded.

Bausch’s 5% senior notes due 2028 (Caa2/CCC/B) were down about 1/8 point on the day and flat from Friday at 50½ bid in mostly light trading.

Also, the 5¼% senior notes due 2031 traded about 1 5/8 points lower at 46 bid.

The Laval, Quebec-based pharmaceutical company reported Tuesday that second-quarter revenue was down 6%, while losses declined to $145 million from $595 million of losses a year ago.

Bausch said it remains committed to spinning off its Bausch + Lomb segment.

CHS paper slips

CHS/Community Health Systems, Inc.’s notes fell on Tuesday after posting gains at the start of the week, a source said.

CHS’ 6 7/8% senior secured second-lien notes due 2029 (Caa2/CCC/CCC) gave back ¾ point on Tuesday after improving 2 points on Monday. The notes were quoted at 60¼ bid.

The company’s 6 1/8% senior secured notes due 2030 (Caa2/CCC/CCC) dropped ½ point to the 56½ bid area in light trading on Tuesday.

The notes were up 2 points in the prior session.

The Franklin, Tenn.-based operator of acute care and outpatient facilities reported heavy second-quarter losses in July.

Distressed returns up

S&P U.S. High Yield Corporate Distressed Bond index total returns kicked the week off higher.

One-day returns rose to 0.79% on Monday from 0.21% on Friday and 0.19% in the same session a week ago.

Month-to-date total returns hit 2.1% on Monday, compared to 1.3% on Friday and 0.19% the same day a week ago in the first session of the month.

Year-to-date total returns improved to minus 19% from minus 19.63% on Friday and minus 20.52% in the week-ago session.

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