Intelsat sees gains after confirming merger with OneWeb; Valeant down post-results; Endo, Neiman unchanged

By Colin Hanner

Chicago, Feb. 28 – Earnings announcements took the bulk of attention for just a few distressed companies on Tuesday, traders said, with one company building on gains it made on Monday’s session.

“It was all Intelsat [SA] today,” a trader said. “They started raging on merger and continued, albeit at not the same clip” as Monday. The merger in question, which broke late in the day on Monday via Sky News, was confirmed on Tuesday between Intelsat and global communications company, OneWeb LLC.

Intelsat also released its fourth quarter results and a series of exchange offers for several of its outstanding senior notes.

“Intelsat was the name du jour,” another trader said.

Swinging the opposite direction, Valeant Pharmaceuticals International, Inc. was “very active,” a trader said, and saw declines in several of its issues after it announced disappointing fourth quarter results.

Two sellside traders said the bulk of attention was focused on the aforementioned companies’ issues.

“Those two were the most notable,” a trader said. “There wasn’t a whole lot past that.”

Fellow pharmaceutical company Endo International plc topped market estimates, but a trader said two of its issues were largely unchanged on the day.

Elsewhere in the distressed arena, telecommunications company Avaya Inc. was up marginally in an issue that was trading in the same zip code for the previous two sessions, Neiman Marcus Group, Inc. was largely unchanged and several idiosyncratic issues were mixed on the session.

Intelsat trades higher

News of a potential merger between Intelsat and OneWeb was confirmed on Tuesday when the two companies announced a share-for-share transaction agreement that will effectively combine the two companies.

Softbank Group Corp. will also invest $1.7 billion in common and preferred stock for Intelsat to reduce its debt load, according to a news release.

An exchange offer for several sets of notes from Intelsat’s Jackson, Luxembourg and Connect Finance subsidiaries was also announced, and, combined with Softbank’s investment, are “intended to reduce Intelsat's debt by approximately $3.6 billion, assuming the minimum level of participation in the debt exchange offers is achieved,” the news release said.

All of Intelsat’s subsidiaries’ debt was “very active,” a trader said, particularly Intelsat Jackson Holdings SA’s 5½% notes due 2023 notes, which were up ¼ point to a 76½ zip code, a trader said.

The 7¼% notes due 2019 were up 2¼ points to 96½, while the 7¼% notes due 2020 were up 2½ points to 93.

Rounding out the Jackson-held bonds were the 7½% notes due 2020, which were up 1 point to 91½.

“Most of this stuff is hardly even in a [distressed] neighborhood at this point,” a trader said, while another trader said most of the Jackson-held notes traded down off their intraday highs.

Intelsat Luxembourg Holdings SA’s 8 1/8% notes due 2023 were up 4½ points to 55½, and the biggest gainer of the day were the similarly-held 7¾% notes due 2021, which were up 11½ points to 56.

A trader said the Luxembourg issues rallied as high as the high-50s before going out with a mid-50s handle.

Valeant drops on results

Valeant Pharmaceuticals, a company that has come under the microscope in the distressed realm and especially in the pharmaceutical industry, was down on Tuesday following fourth quarter results.

A trader said the 5 7/8% notes due 2023 were down 1½ points, hovering around a high-70 zip code, while the 6 3/8% notes due 2020 were down 1 point to 91½.

The 5 3/8% notes due 2020 were down 1 point to 89 3/8, a trader said, while the 7½% notes due 2021 were down 1½ to 92, a market source said.

Overall, the notes rebounded from the intraday lows, a trader said.

Joseph C. Papa, chief executive officer of Valeant Pharmaceuticals, said in a conference call to investors on Tuesday that the Quebec-based company “is in the process of divesting certain businesses in several non-core geographies including Vietnam, Indonesia and Brazil,” according to a call transcript. In recent months, Valeant has completed two series of asset sales totaling more than $2 billion in an effort to reduce its debt load.

For the year, Papa said Valeant paid down $1.84 billion of permanent debt though said there was an increase in short-term debt.

Year-over-year revenue fell to $2.4 billion from $2.7 billion, or 13%, driven by a decrease in product sales and negative foreign currency exchange. Valeant’s 2017 guidance calls for a $5 billion debt reduction this time next year.

The company’s Salix Pharmaceuticals subsidiary, rumored to be part of an asset sale to Takeda Pharmaceuticals early in the fourth quarter, according to the Wall Street Journal, were responsible for a shortfall in Valeant’s Branded Rx segment, which fell 17% in the fourth quarter.

Valeant’s stock was down $2.33, or 13.94%, to $14.38.

Endo steady

The Malvern, Pa.-based Endo International reported earnings during the session, which included the announcement of a divesture of Litha Healthcare Group to Acino Holding Co. for approximately $100 million to decrease the company’s $7.8 billion in debt.

Traders were largely unmoved by the announcement, specifically in the 6% notes due 2025, which were “pretty much” unchanged at 89 3/8, a trader said, followed by the 6% notes due 2023, which were also unchanged at a 92 handle.

Avaya inching higher

For the Santa Clara, Calif.-based Avaya, movement continued at the slow pace of the previous two sessions, inching up just fractions of a point.

The 7% notes due 2019 were up 5/8 point to 80 3/8, a trader said.

One-off roundup

Those rounding out the distressed arena did not see much volume behind them, a trader said, pointing to iHeartCommunications’ 14% notes due 2021 as an example, which saw a ½-point increase to 38¾.

Two sets of Neiman Marcus Group’s notes were unchanged, specifically the 8% notes due 2021, which finished at 62¾, and the 7 1/8% notes due 2028, which remained at 80¾.

And Noble Holdings International Ltd.’s 5¼% notes due 2042 were down 3¾ points to 66½, a trader said, though there was no apparent news behind the decrease.

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