McDermott notes drop on rescue financing; Teva lifted after opioid settlement news

By James McCandless

San Antonio, Oct. 21 – The distressed debt market started a new week with the focus on energy and pharma newsmakers.

McDermott International, Inc.’s notes dropped after the company attained access to up to $1.7 billion in new financing.

As oil futures fell, Whiting Petroleum Corp.’s and Gulfport Energy Corp.’s issues joined the trend while Antero Resources Corp.’s paper put in a mixed performance.

In pharma, Teva Pharmaceutical Industries Ltd.’s notes were lifted after the company came to a settlement with two Ohio counties.

Sector peer Mallinckrodt plc’s issues also finished on better footing.

Retailer Rite Aid Corp.’s paper was seen moving higher throughout the day.

Bed Bath & Beyond, Inc.’s long-term notes were under pressure.

Propane name Ferrellgas Partners LP’s issues saw a negative swing.

McDermott drops

McDermott’s notes dropped by the end of the day, traders said.

The 10 5/8% senior notes due 2024 declined by 4¼ points to close at 24¼ bid.

By the end of activity, about $71 million of the notes changed hands.

On Monday, the Houston-based oil and gas engineering company announced that it entered into an agreement with some of its secured lenders to have access to up to $1.7 billion of additional financing, including letter-of-credit capacity.

The company will have immediate access to $650 million of financing comprised of $550 million under a term loan facility and $100 million under a letter-of-credit facility, Prospect News reported.

As part of the deal to attain the financing, the company agreed to pay about 10% interest on the loan, withdraw its annual guidance and stop efforts to sell its industrial storage tank business.

“I think this gets them through the end of the year and then it’s a different story,” a trader said. “I think it’s likely that they file at that point.”

In September, the notes tanked after news of the company hiring advisers to reconfigure its balance sheet sparked worries in the market.

Oil futures fall

As oil futures fell during the day, distressed energy tranches trended the same way, market sources said.

Futures slumped after U.S. officials cast doubt that a final trade deal could be reached with China by the end of next month.

West Texas Intermediate crude oil futures for November delivery slid 47 cents to settle at $53.31 per barrel.

North Sea Brent crude oil futures for December delivery ended at $58.96 per barrel after a 46 cent loss.

Denver-based independent oil and gas producer Whiting Petroleum’s issues followed the negative trend.

The 6¼% senior notes due 2023 shaved off ¾ point to close at 75¾ bid. The 6 5/8% senior notes due 2026 fell 1¾ points to close at 64½ bid.

Oklahoma City-based oil and gas producer Gulfport Energy’s paper was also trailing.

The 6 5/8% senior notes due 2023 dipped ½ point to close at 74¾ bid.

Antero, a Denver-based producer, saw its notes vary.

The 5 3/8% senior notes due 2021 lost 1¼ points to close at 90½ bid. The 5 1/8% senior notes due 2022 added ¼ point to close at 80¾ bid.

Teva, Mallinckrodt rise

Meanwhile, in the pharma space, Teva’s issues were lifted, traders said.

The 3.15% senior notes due 2026 jumped up 2½ points to close at 76½ bid. The 6¾% senior notes due 2028 rose 3¾ points to close at 91¾ bid.

News broke early Monday that the Petach Tikva, Israel-based generic drug producer had reached a settlement in an opioid-related lawsuit that was slated to begin the trial phase this week.

The company was party to the lawsuit along with three major drug distributors, who also reached settlements.

Concurrently, Teva announced that it had reached an agreement in principle on a blanket settlement against all remaining lawsuits pending.

The settlement would see the company donate medications it values at $23 billion over the next 10 years while also paying out $250 million in cash over the same period.

“It’s lower that what everybody was anticipating,” a trader said. “I think bondholders see this as a significant reduction of risk going forward.”

Staines-upon-Thames-based sector peer Mallinckrodt’s paper was also seen gaining.

The 5¾% senior notes due 2022 garnered 2½ points to close at 41 bid. The 4 7/8% senior notes due 2020 gained ¾ point to close at 60¾ bid.

Rite Aid up; Bed Bath off

In retail, Rite Aid’s notes moved higher, market sources said.

The 6 1/8% senior notes due 2023 improved by ½ point to close at 85 bid.

The Camp Hill, Pa.-based drug store chain has been trending positively despite two successive downgrades from ratings agencies last week.

S&P Global Ratings and Moody’s Investors Service both said that the company’s tender offers for its 2027 and 2028 tranches were tantamount to a distressed exchange and puts the company in default.

Union, N.J.-based peer Bed Bath’s issues moved under pressure.

The 5.165% senior notes due 2044 dipped ¼ point to close at 72¾ bid. The 4.915% senior notes due 2034 shed ½ point to close at 76 bid.

Ferrellgas negative

Elsewhere, Ferrellgas’ paper took a negative track, traders said.

The 6¾% senior notes due 2022 gave back ½ point to close at 83½ bid. The 6¾% senior notes due 2023 shaved off ¼ point to close at 83½ bid.

The Overland Park, Kan.-based propane company is under pressure from the market as it faces another tumultuous aftermath of lackluster quarterly results, in which it expressed worries of being able to continue as a going concern.

On another front, the company is facing claims from its largest creditor that it is in default.

© 2015 Prospect News.
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