Mallinckrodt continue high volume after acquisition news; Hexion rumors keep up demand on issues

By James McCandless

San Antonio, Feb. 14 – Traders reported a steady day in distressed debt trading Wednesday, as more investors slowly jump back into the mix after being scared off by volatility in the equity markets.

Notes in Mallinckrodt plc closed higher at the end of trading. On Tuesday, the company announced the acquisition of Sucampo Pharmaceuticals.

As selloff rumors persist for another day, despite no official word from the parties involved Hexion, Inc. issues continued trading in high volume.

High volume activity for Revlon, Inc. reversed Tuesday’s losses. The company’s paper continues a positive trend set after the recent news that its chief executive officer had left his post.

Distressed telecom names Frontier Communications Corp. and Intelsat SA remained perennial volume favorites. A 2-point bump in oil futures saw a drop off in distressed energy names, namely California Resources Corp. and EP Energy, Inc.

Acquisition drives Mallinckrodt

Notes in Britain-based drug maker Mallinckrodt traded heavily a second day, according to a market source, after reports confirmed Tuesday that it had completed the $1.2 billion acquisition of Rockville, Md.-based biopharmaceutical company Sucampo Pharmaceuticals Inc.

“It’s a potentially lucrative expansion into the North American market if they can make it work,” a trader said.

The 4¾% notes due 2023 picked up ½ point to close at 77¾ bid.

Rumors abound for Hexion

As traders continue to speculate on who would potentially purchase parts of Columbus, Ohio-based chemical name Hexion, issues continued a week-long stretch of activity. Its sponsor, Apollo Global Management, has been thought to be considering a sell-off for the near future.

“I would be surprised if they don’t announce something about this in the next few months,” a trader said. “If that were the case, those bonds didn’t move for much of anything.”

The 9% issues due 2020 traded up ½ point to close at 81½ bid. The 6 5/8% issues due 2020 rose 7/8 point to close at 94 bid.

Revlon drives up

Positive movement continued for New York City-based cosmetics producer Revlon’s paper in Wednesday trading, a market source said, continuing an upswing that began recently after the company announced the departure of CEO Fabian Garcia.

The 5¾% notes due 2021 climbed more than 1 point to close at 79¾ bid. The 6¼% notes due 2024 jumped 1½ point to close at 66 bid.

Telecom and oil active

Distressed names in the telecom space remained active Wednesday, according to traders. Norwalk, Conn.-based wireline telecom Frontier Communications notes have been particularly active since announcing positive changes to its credit agreements, paving the way for better debt flexibility.

The 7 5/8% notes due 2024 traded up about 4 points to close above 61 ½ bid. The 10½% notes due 2022 shaved off more than 1 point to close at 80½ bid. The 11% notes due 2025 fell about ¼ point to close at around 73¾ bid.

Luxembourg-based satellite communications company Intelsat’s 5½% issues due 2023 rose almost 2 points to close at 78 1/8 bid. The Intelsat Jackson SA 7¼% notes due 2020 rose slightly to close at 86 bid.

An uptick in oil futures led to another active day for distressed energy names, a market source said. Los Angeles-based independent oil and gas producer California Resources was one of the most active names. Its 6% paper due 2024 fell 6½ points to close at 64 ½ bid. The 8% paper due 2022 edged up ¼ point to close at 79¼ bid.

Houston-based oil and gas name EP Energy saw its 7¾% notes due 2022 dive almost 11 points to close at 61 bid while its 6 3/8% notes due 2023 fell about 3 points to close at 57½ bid.

It has been slow and steady this week,” a trader said. “I think if we can string together a few more days like this then people will be more willing to jump back in. But we take our cues from the equity market, so time will tell.”

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