Endo up post-bankruptcy filing; Mallinckrodt soft; Bausch pressured; trading thin

By Cristal Cody

Tupelo, Miss., Aug. 18 – Distressed pharmaceutical names remained strongly traded on Thursday on the heels of Endo International plc’s Chapter 11 bankruptcy announcement the prior session.

“The first liens definitely are doing a little bit better,” a market source said.

Endo’s notes were quoted late afternoon up 1¼ points.

Endo’s bankruptcy filing came as a bit of a surprise to market participants with the company widely projected to stave off filing a while longer.

“It should be interesting to watch,” a source noted.

The space is growing with several pharmaceutical names trading at distressed levels.

The 10% second-lien notes due 2029 (Caa2/CCC) that Mallinckrodt plc issued in connection with its emergence from Chapter 11 bankruptcy in June have been under pressure since the company posted its second-quarter earnings report last week.

“They’re down about 10 points in the last week,” a source noted. “They had a bad quarter.”

Bausch Health Cos. Inc.’s paper also moved about 1 point to 2 points lower in secondary trading on Thursday.

Market tone was mostly stronger with stock indices marginally higher, crude oil up and volatility lower on the day.

The iShares iBoxx High Yield Corporate Bond ETF improved 12 cents, or 0.15%, to $77.74.

The CBOE Volatility index declined 1.61% to 19.58.

“It was pretty firm, up 1/8 to ¼ point in general,” according to a market source. “It was also pretty quiet,”

Overall distressed trading activity has been lighter in the back half of the month with the week seeing secondary traders and folks on syndicate desks out for vacations and end-of-summer plans, sources said.

Endo notes better

Endo’s paper headed out more than 1 point better on Thursday in strong trading action following the company’s announcement Wednesday that it filed for Chapter 11 bankruptcy, market sources said.

Endo subsidiary Par Pharmaceutical Inc.’s 7½% senior secured first-lien notes due 2027 (Caa2/D) were quoted late afternoon at 86¾ bid, 87¾ offered.

The issue was seen up 1¼ points at 86½ bid on $14 million of secondary volume by the end of the session.

The day before the company filed, the notes were quoted at 84, 85.

Endo Finance LLC’s 6% senior notes due 2028 (C/D) traded 1¼ points better at 5¾ bid, 6¾ offered by the close on Thursday.

Trading was lighter with $4 million of volume seen in the notes.

The issue was quoted at 5¼ bid, 6¼ offered the day before the company filed.

Endo filed on Tuesday in the U.S. Bankruptcy Court for the Southern District of New York and entered into a restructuring agreement with stalking horse bidder Ad Hoc First Lien Group, which is made up of certain creditors holding more than 50% of its outstanding secured debt.

The bankruptcy filing came after the 30-day grace period in connection with Endo’s missed $1.9 million payment due July 15 on its 5 3/8% senior notes due 2023 expired Monday.

The Dublin-based pharmaceuticals company has missed several bond interest payments and posted heavy second quarter earnings losses earlier in August.

Mallinckrodt down

Mallinckrodt’s 10% second-lien notes due 2029 (Caa2/CCC) were quoted going out at 45 bid, 47 offered on Thursday, a source said.

The bonds have dropped from the upper 50s bid range a week ago.

The notes were issued by Mallinckrodt International Finance SA in connection with the Dublin- and St. Louis-based pharmaceutical company’s exit from Chapter 11 bankruptcy in June.

Bausch moves down

Bausch’s notes were trading about 1 point to 2 points weaker over the day, according to market sources.

“They’re all down a point or two,” one source said.

The company’s 9¼% senior notes due 2026 (Caa2/CCC/B) stayed soft on Thursday with the issue quoted at 69½ bid, 70½ offered.

Bausch’s notes were down from 72 bid, 73 offered at the start of the week.

The Laval, Quebec-based pharmaceutical company’s 6½% senior notes due 2029 also declined to 50 bid, 51 offered over the session.

Distressed returns lower

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns softened Wednesday to minus 0.48% from 0.05% on Tuesday and 0.47% on Monday.

Month-to-date total returns fell to 4.40% versus 4.54% on Tuesday and 4.49% at the start of the week.

Year-to-date total returns declined to minus 17.46% from minus 17.07% on Tuesday and minus 17.11% on Monday.

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