Rite Aid notes decline on competitor news; Mallinckrodt paper weakens in pharma space

By James McCandless

San Antonio, Nov. 17 – Retail and pharmaceutical names in the distressed debt market were the focus of trading activity Tuesday.

Rite Aid Corp.’s notes lost ground after e-commerce giant Amazon.com Inc. announced that it would offer an online prescription drug service to consumers.

Sector peer PetSmart, Inc.’s issues varied in direction.

Meanwhile, pharma name Mallinckrodt plc’s paper ended the day worse off after as more governmental entities endorse the company’s settlement plan.

After receiving a ratings upgrade, Tupperware Brands Corp.’s notes finished the session in a better position.

In the oil and gas space, Gulfport Energy Corp.’s issues were in decline as the company won access to debtor-in-possession financing.

Occidental Petroleum Corp.’s and Antero Resources Corp.’s paper diverged, and Callon Petroleum Co.’s notes improved.

Elsewhere, theater operator Cinemark Holdings, Inc.’s issues yielded mixed results.

Rite Aid weakens

Rite Aid’s notes lost ground by Tuesday’s conclusion, traders said.

The 7.7% senior debentures due 2027 fell 2¾ points to close at 80¼ bid. The 8% notes due 2026 dropped 2½ points to close at 101½ bid.

The Camp Hill, Pa.-based drug store chain’s structure was under water after e-commerce giant Amazon.com announced that it was entering the pharmacy business on Tuesday morning.

With Amazon Pharmacy, the retailer will offer customers the opportunity to have prescription medications delivered to their homes.

Through the coronavirus pandemic, Rite Aid has seen sales sustained, exemplified by its most recent earnings report.

For the second quarter, the company showed a earnings per share of 25 cents and revenues of $5.98 billion.

“Amazon seems ready to swipe a decent share of this market,” a trader said. “It will be interesting to see how Rite Aid adapts. Right now, the bonds are trading on some doubts.”

Phoenix-based pet supplies name PetSmart’s issues varied in direction.

The 8 7/8% senior notes due 2025 shaved off ¼ point to close at 99½ bid. The 5 7/8% senior notes due 2025 held level to close at 101¾ bid.

Mallinckrodt edges lower

Meanwhile, pharma name Mallinckrodt’s paper ended the day worse off, market sources said.

The 5¾% senior notes due 2022 chalked off ½ point to close at 33 bid. The 4¾% senior paper due 2023 slipped ¼ point to close at 7¾ bid.

Late Monday, news broke that the Staines-upon-Thames, England-based drug producer has received broad support for its blanket opioid settlement from more than a thousand government entities across the country.

Earlier in the year, the company reached a proposed $1.6 billion settlement for thousands of lawsuits brought over the propagation and marketing of opioids.

Also on Monday, the company petitioned its bankruptcy court judge to block any ongoing litigation against it concerning Acthar gel during Chapter 11 proceedings.

In March, the federal government filed a lawsuit against Mallinckrodt, accusing it of defrauding Medicaid over rising Acthar gel prices.

The company wants a preliminary injunction to stay suits against the distributor of the drug, Express Scripts.

Tupperware better

Housewares maker Tupperware’s notes finished the session in a better position, traders said.

The 4¾% senior notes due 2021 rose ¼ point to close at 101 bid.

During the Tuesday session, the Orlando, Fla.-based housewares marketer received a ratings upgrade from Moody’s Investors Service.

The agency improved the company’s corporate family rating, probability of default rating and senior unsecured notes rating.

Other ratings were put on review for further upgrade.

Moody’s made the change based on Tupperware’s enhanced operating performance and the increased likelihood that it would refinance its 2021 note maturity.

On Nov. 2, the company entered into a commitment for $275 million in term loans.

Gulfport declines

In the oil and gas space, Gulfport’s issues were in decline, market sources said.

The 6 5/8% senior notes due 2023 shed 1¼ points to close at 56½ bid. The 6% senior notes due 2024 were docked 1 point to close at 56¾ bid.

On Monday, the Houston-based independent oil and gas producer received court approval to access $90 million of a proposed $262.5 million in DIP financing, Prospect News reported.

Interest is Libor plus 450 basis points, subject to a 1% Libor floor.

The financing is structured to fund the company’s operations during the Chapter 11 proceedings, including employee wages and benefits and payments to suppliers and vendors.

A final hearing is slated for Dec. 11.

Gulfport filed for bankruptcy on Monday to implement a pre-arranged plan of reorganization.

Oil in focus

As oil futures took separate paths, distressed energy names also saw differing movements, traders said.

West Texas Intermediate crude oil futures for December delivery moved up 9 cents to finish at $41.43 per barrel.

North Sea Brent crude oil futures for January delivery drifted to $43.75 per barrel after a 7 cent dip.

Houston-based producer Occidental Petroleum’s paper also diverged.

The 2.9% senior notes due 2024 closed level at 91½ bid. The 2.7% senior paper due 2022 garnered ½ point to close at 97¼ bid.

Denver-based E&P company Antero Resources’ notes took opposite paths.

The 5 1/8% senior notes due 2022 gained 2½ points to close at 95¼ bid. The 5% senior notes due 2025 fell 1 point to close at 77½ bid.

Houston-based peer Callon Petroleum’s issues improved.

The 6 1/8% senior notes due 2024 gained 1 point to close at 40 bid.

Cinemark mixed

Elsewhere, theater operator Cinemark’s paper yielded mixed results, market sources said.

The 5 1/8% senior notes due 2022 chalked off ¼ point to close at 95½ bid. The 4 7/8% senior paper due 2023 improved by ¼ point to close at 93¼ bid.

During Monday’s activity, reports indicated that the Plano, Tex.-based movie theater operator had reached a theater window agreement with Universal Pictures.

According to the agreement, the studio has the ability to release films on digital platforms as soon as 17 days after theater debuts.

Movies that gross $50 million or more in the opening weekend at the box office would remain exclusively in theaters for 31 days.

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