Frontier lower on analyst downgrade; Teva down on settlement news

By James McCandless

San Antonio, June 12 – The telecom and pharmaceutical spaces took up much of the attention of the distressed market in the middle of the week.

Frontier Communications Corp.’s notes moved lower after receiving an analyst downgrade on some of its bonds.

Sector peer Intelsat SA’s issues were mixed.

Meanwhile, in pharma, Teva Pharmaceutical Industries Ltd.’s paper declined as a judge held up its $85 million settlement with Oklahoma.

Elsewhere in the sector, Mallinckrodt plc’s notes improved.

In energy, Ensco Rowan plc’s issues finished mixed after an investor called for a bond sale to fund a special dividend.

Oil futures traded down, taking Halcon Resources Corp.’s and Denbury Resources Inc.’s paper with it as California Resources Corp.’s notes ended mixed.

Retailer PetSmart, Inc.’s issues trended positive as the company increased its IPO estimate.

Frontier lower, Intelsat mixed

Frontier’s notes were seen moving lower during Wednesday’s session, traders said.

The 10½% notes due 2022 dropped 4½ points to close at 67½ bid. The 11% notes due 2025 lost 2½ points to close at 61½ bid.

The two tranches combined saw $39 million in trading.

On Wednesday, an analyst with JPMorgan issued downgrades on some of the Norwalk, Conn.-based wireline communications name’s bonds.

The analyst cited the company’s need to increase cash flow or come up with a solution to relieve the pressure of its 2022 maturity wall.

“I think there’s some chatter resurfacing about bankruptcy,” a trader said. “Which has always been in the wind but with the recent asset sale some thought they could push it back.”

Another trader pointed to its new board members as a sign of a restructure to come.

“It’s the most likely conclusion if you get someone with that kind of experience,” a trader said.

Recently, the company sold off its assets and operations in four western states for $1.35 billion.

It made clear that the proceeds would be used to pay off debt.

Luxembourg-based sector peer Intelsat’s issues were mixed.

Intelsat Jackson Holdings SA’s 5½% notes due 2023 tacked on ¼ point to close at 89¾ bid. Intelsat (Luxembourg) SA’s 8 1/8% notes due 2023, while moving up to 76 bid during the session, ended level at 75½ bid.

Teva down, Mallinckrodt gains

Meanwhile, in pharmaceuticals, Teva’s paper was in decline, market sources said.

The 3.15% paper due 2026 shaved off 3 points to close at 78¼ bid. The 4.1% paper due 2046 fell 2½ points to close at 67 bid.

The Petach Tikva, Israel-based generic drugmaker saw additional pressure on Wednesday after a judge sought clarification and withheld approval on its $85 million settlement with Oklahoma.

The settlement was reached before a trial over the name’s alleged part of the opioid epidemic was set to be litigated.

“In cases like this, any news is bad news,” a trader said. “But it looks like administrative issues. It’s very unlikely that they’ll want more money.”

Analysts have been weighing in on the company’s short-term and long-term legal exposure, adding to the pressure.

Staines-upon-Thames, England-based Mallinckrodt’s notes gained.

The 5¾% notes due 2022 added 1 point to close at 84½ bid.

Ensco Rowan mixed

Elsewhere, in energy, Ensco Rowan’s issues finished the day mixed, traders said.

The 5.2% notes due 2025 dipped 1¼ points to close at 70 bid. The 7¾% notes due 2026 added 2 points to close at 78 bid.

Holders of a large portion of the London-based contract driller’s common stock called on the company to hold a bond sale in order to fund a $2.5 billion special dividend to shareholders.

Luminous Management LLC argued that the company is financially stable enough to do so and it would reward shareholders that have not seen gains from the merger.

“They’re mostly just complaining about how the stock has done since the merger,” a trader said.

Oil loses

Distressed oil tranches trended lower with crude oil futures, market sources said.

Houston-based independent oil and gas producer Halcon’s paper was negative.

The 6¾% paper due 2025 dove 3½ points to close at 39 bid.

Denbury, another Houston-based producer, also saw its notes move downward.

The 6 3/8% notes due 2021 fell 1 point to close at 81 bid. The 5½% notes due 2022 declined by 1¼ points to close at 60¾ bid.

Los Angeles-based sector peer California Resources’ issues ended mixed.

The 6% notes due 2024 held level at 60 bid. The 8% notes due 2022 dropped 2 points to close at 70 bid.

West Texas Intermediate crude oil futures for July delivery gave back $2.13 to close the day at $51.14 per barrel.

North Sea Brent crude oil futures for August delivery finished at $59.97 per barrel after a $2.32 loss.

PetSmart positive

Retailer PetSmart’s paper was trending positive throughout the session, traders said.

The 8 7/8% paper due 2025 gained ½ point to close at 98 bid. The 5 7/8% paper due 2025 picked up ¼ point to close at 96½ bid.

The Phoenix-based pet supplier said on Wednesday that it has adjusted its price range for e-commerce segment Chewy.com’s initial public offering to $19 to $21 per share from $17 to $19 per share.

The company expects to raise more than $800 million under the new guidance.

The IPO is expected to commence on Friday.

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