Drugstore, pharmaceutical paper mixed following opioid deal; Rite Aid notes lower

By Cristal Cody

Tupelo, Miss., Nov. 2 – Distressed pharmaceutical paper went out mixed on Wednesday following new opioid-related settlements with CVS Health Corp. and Walgreens Boots Alliance, Inc.

CVS said it agreed to pay approximately $5 billion over the next 10 years to resolve all opioid lawsuits and claims against the company by U.S. states, cities, counties and tribes.

Walgreens reported it expects to settle all opioid claims against it by states, subdivision and tribes for up to approximately $4.95 billion to be paid over 15 years.

Drugstore chain Rite Aid Corp.’s 8% senior secured notes due 2026 (B3/CCC-/BB-) traded down 2 1/8 points on Wednesday.

Meanwhile, bankrupt pharmaceutical manufacturer Endo International plc’s 9½% bonds due 2027 were on the move higher by about 1 point to 1¼ points, going out at the upper end of gains.

Pharmaceutical company Bausch Health Cos. Inc.’s 5% senior notes due 2029 (Ca/CCC/CC) also improved ¼ point in light trading.

Stocks sank on Wednesday with indices down more than 1½% to 3.36% following the Federal Reserve’s interest rate hike.

The Federal Reserve raised the benchmark interest rate to 3¾% to 4%, which followed September’s 75 basis point hike to 3% to 3¼% and steady increases since March when the target range on the Federal Funds rate was upped to ¼% to ½%.

The Federal Open Market Committee said it “is strongly committed to returning inflation to its 2% objective” and anticipates that ongoing increases in the target range will be appropriate.

The iShares iBoxx High Yield Corporate Bond ETF dropped 67 cents, or 0.91%, to $72.92.

The CBOE Volatility index was steady at 25.86, up 0.19%.

Rite Aid declines

Rite Aid’s 8% senior secured notes due 2026 (B3/CCC-/BB-) traded down 2 1/8 points Wednesday to 62¼ bid with the paper edging up to the 63 bid area in lighter afternoon supply, a source said.

The Camp Hill, Pa.-based drug retailer’s notes were down more than 3 points from last week.

Rite Aid’s credit default swaps spreads moved out in October and were seen in the prior week at more than 3,300 bps.

Endo trades up

Endo’s 9½% bonds due 2027 traded 1 point to 1¼ points higher on Wednesday, going out at the upper end of gains at 10¾ bid, a source said.

The issue finished October below 10 bid after trading over the month with a 15 handle.

Endo filed for Chapter 11 bankruptcy in August following missed note payments and several opioid-related lawsuit settlements.

The Dublin-based pharmaceuticals company 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.

Bausch slightly better

Bausch Health’s 5% senior notes due 2029 (Ca/CCC/CC) improved ¼ point in mostly thin trading on Wednesday, a source said.

The bonds were quoted at 39¼ bid.

The Laval, Quebec-based pharmaceutical company is underway with plans to separate its unit Bausch + Lomb.

November returns soft

S&P U.S. High Yield Corporate Distressed Bond index one-day returns declined in the first day of November.

One-day returns fell to minus 0.15% on Tuesday from 0.15% on Monday.

Returns quarter-to-date totaled 0.59% at the week’s start.

Year-to-date total returns widened to minus 25.78% from minus 25.67% on Monday.

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