PG&E continues to decline; Endo gains after settling suit; Tenet varies

By James McCandless and Paul A. Harris

San Antonio, Aug. 20 – Trading in the high-yield secondary focused on utilities and pharmaceutical tranches while the primary remained quiet in the late summer lull.

Elanco Animal Health Inc. received a bridge loan, giving hope for some primary movement.

PG&E Corp.’s notes continued to trade under water after a bankruptcy judge ruled that suits against the company over wildfire damages could advance.

Endo International plc’s issues were gaining throughout the day after announcing a settlement with two Ohio counties over opioid claims.

Sector peer Teva Pharmaceutical Industries Ltd.’s paper was also improving.

Health care name Tenet Healthcare Corp.’s notes varied in direction.

Chemicals name Chemours Co.’s issues rose despite a ratings agency downgrade.

Elanco bridge

The Tuesday session generated one news nugget possibly bearing upon future high-yield issuance.

Elanco Animal Health received a commitment for $2.75 billion of bridge loans and $3.75 billion of credit facilities to help fund its acquisition of Bayer AG’s animal health business.

Goldman Sachs provided the debt commitment.

Closing is targeted for mid-2020 (see related story in this issue).

Business after Labor Day

Elsewhere the primary market remained quiet on Tuesday, with sources saying that the traditionally dormant Dog Days of August are upon the new issue market.

No deals are expected until the market reconvenes after the extended Labor Day holiday weekend which gets underway following the Aug. 30 close.

One syndicate official professed visibility on $20 billion to $25 billion of committed merger and acquisition financing business that needs to come to market between early September and the end of 2019.

There could also be a substantial amount of opportunistic debt refinancing during the late third quarter and fourth quarter of the year, provided that there is some stability in the global financial markets, sources say.

PG&E declines

In the utilities space, PG&E’s notes continued to drop under pressure, traders said.

The 6.05% notes due 2034 shed 1 point to close at 108½ bid.

The notes had about $19 million changing hands.

On Monday, the notes dropped 1¾ points.

The market continues to drive the San Francisco-based bankrupt electric utilities’ paper lower in reaction to Friday’s news that it faces increased risk from wildfire victim lawsuits.

A bankruptcy judge ruled that the suits could advance, potentially putting the name on the hook for as much as $18 billion more.

“I think it will continue to be dragged lower,” a trader said. “It’s attractive to distressed guys now that there’s more risk.

On a positive note for the company, the judge also ruled that it would retain full control of its restructuring process after rejecting petitions from two creditor groups with competing plans.

Endo, Teva improve

Meanwhile, drug maker Endo’s issues were seen gaining on Tuesday, market sources said.

The 6% senior notes due 2023 jumped up 5¾ points to close at 67¼ bid. The Par Pharmaceutical Cos., Inc. 7½% senior secured notes due 2027 rose 2¼ points to close at 94½ bid.

The two tranches combined to see about $23 million on the tape by the close.

Early TuesdayEndo announced that it had reached a settlement with two counties in Ohio over its alleged involvement in the propagation of the opioid epidemic.

The company agreed to pay a total of $10 million to Cuyahoga and Summit counties.

It also committed to give the counties free of charge $1 million of two of its drugs.

The settlement includes language absolving Endo and its subsidiaries of any “wrongdoing, fault or liability of any kind.”

“It’s the best-case scenario for these kinds of cases,” a trader said. “There has been significant pressure on the sector.”

Petach Tikva, Israel-based sector peer Teva’s paper was also improving.

The 2.8% senior paper due 2023 garnered 1¾ points to close at 83 bid. The 3.15% paper due 2026 picked up 1 point to close at 73¾ bid.

Tenet varies

In health care, Tenet’s notes were active but varied in direction, traders said.

The 4 7/8% senior notes due 2026 gained ¼ point to close at 101¾ bid. The 5 1/8% notes due 2027, while reaching 102½ during the session, closed level at 102¼ bid.

The two notes saw $32 million trading by the end of the afternoon.

The 4 7/8% notes have seen an upward trend since pricing on Aug. 12 in three tranches totaling $4.2 billion.

Chemours rises

Chemicals name Chemours’ issues were on the rise, market sources said.

The 6 5/8% senior notes due 2023 tacked on ¼ point to close at 101¼ bid. The 5 3/8% senior notes due 2027 added ¾ point to close at 88½ bid.

The Wilmington, Del.-based chemicals producer’s paper rose during a day of conflicting ratings changes for the name.

Before the market opened on Tuesday, an analyst at Susquehanna upgraded the company to positive from neutral.

Later in the day, S&P Global Ratings revised its outlook to negative from stable, affirming its BB rating.

The agency cited a lackluster second-quarter earnings report and a low probability of quick improvement.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs saw $254 million of inflows on the day.

However actively managed funds sustained $74 million of outflows on Monday, the source said.

Indexes better

Three high-yield indexes posted positive movements for the Tuesday session.

The KDP High Yield Daily index rose 8 basis points to finish the day at 71.20 with the yield now at 5.64%.

The index picked up 18 basis points on Monday, gained 2 bps on Friday and lost 9 bps on Thursday.

The ICE BofAML US High Yield index improved by 11.4 bps on Tuesday with the year-to-date return now at 10.182%.

The index added 26.4 bps on Monday, improved by 18.9 bps on Friday and picked up 2 bps on Thursday.

The CDX High Yield 30 index tacked on 35.47 bps to end Monday at 106.0827.

The index added 35 bps on Monday, rose 58 bps on Friday and rose 20 bps on Thursday.

Sara Rosenberg contributed to this report.

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