Pharma names see negativity; Range Resources varies; GTT declines

By James McCandless and Paul A. Harris

San Antonio, Aug. 27 – Tuesday in the high-yield secondary was negative across the spectrum, anchored by pharma and energy.

Pharma names Endo International plc’s and Teva Pharmaceutical Industries Ltd.’s notes dropped in the wake of a high-profile opioid lawsuit judgment.

Meanwhile, in energy, Range Resources Corp.’s distressed issues were active but largely unchanged following a ratings agency downgrade.

Despite rising oil futures, California Resources Corp.’s and Whiting Petroleum Corp.’s notes were under pressure.

Elsewhere, GTT Communications, Inc.’s notes fell as its chief financial officer prepares to leave the position.

TV name Sinclair Broadcast Group Inc.’s issues diverged in heavy trading.

The primary market stayed quiet, waiting for September.

Cautious forecast

The dollar-denominated new issue market remained dormant, and is expected to stay that way for another week, at which time market participants – many now taking mandatory vacations – will rejoin the market following the extended Labor Day holiday weekend in the United States, which concludes when the market reopens on Tuesday, Sept. 3.

Forecasts for post-Labor Day issuance have tended to be somewhat cautious.

One figure being tossed around is $30 billion total of issuance between Sept. 3 through Jan. 31, a syndicate banker said on Tuesday.

Should that forecast prove accurate, 2019 post-Labor Day issuance would be the lowest in a decade, slightly below the $32.3 billion seen in that period last year, according to Prospect News data.

The post-Labor Day period is typically a robust one in the primary market, figures show.

Average issuance is $87.8 billion for post-Labor Day through the end of the year.

Not surprisingly, the biggest post-Labor Day-to-year-end period came in the record-setting year of 2012: $134.8 billion in 288 million junk-rated, dollar-denominated tranches, capping a year that holds the record for total issuance at $325.2 billion.

The 2012 deal volume, 288 tranches, also represents the highest post-Labor Day deal volume, easily topping the 243 tranches seen in 2010, the second highest for the post-Labor Day period.

Average post-Labor Day deal volume is 169 tranches.

The lowest post-Labor Day deal volume since 2010, 52 tranches, came in 2018.

New issue activity should ramp up quickly after the coming holiday, market sources say.

September new issue volume could be heavy, the syndicate banker said on Tuesday.

And watch for the dealers to get out of the gate soon after the market convenes on Sept. 3, the source advised.

One caveat is, of course, market conditions in the coming autumn.

To a certain extent the junk bond market has held in as headlines about trade war and interest rate expectations have roiled equities, a trader observed.

But the junk bond market certainly is not immune to such headlines, the source added.

Pharma space drops

In the wake of a high-profile opioid lawsuit settlement order, distressed pharmaceutical tranches all dropped, traders said.

Endo’s 6% senior notes due 2025 fell 3¼ points to close at 63½ bid.

The Par Pharmaceutical Cos. Inc. 7½% senior secured notes due 2027 declined 1½ points to close at 93 bid.

The Dublin-based drug producer’s structure was among the most active in distressed trading a day after an Oklahoma judge ordered sector peer Johnson & Johnson to pay $572 million in opioid-related damages to the state.

Although the company plans to appeal the decision, the market spent Tuesday debating what future litigation may cost the industry.

In a note, an analyst at Susquehanna Financial said that the total across the country could be $37 billion.

“This is what’s keeping the sector so active and topical,” a trader said. “There’s a lot of talk on who could be the most exposed.”

Petach Tikva, Israel-based generics maker Teva’s issues were also trending lower.

The 2.8% senior notes due 2023 held level at 84 bid. The 3.15% senior notes due 2026 lost 1½ points to close at 73 bid.

Range varies

Meanwhile, in energy, Range Resources’ paper saw mixed activity, market sources said.

The 4 7/8% senior paper due 2025, while moving as low as 81 bid during the day, ended level at 82 bid. The 5¾% senior paper due 2021 lost ¼ point to close at 99¾ bid.

On Tuesday, S&P Global Ratings issued a downgrade for the Fort Worth-based natural gas producer.

The agency lowered its unsecured issue-level ratings to BB from BB+, citing an assumption for lower prices for natural gas and natural gas liquids.

S&P also sees the company’s credit metrics as weaker than expected through 2020.

Oil names down

Despite gains for oil futures, distressed energy names were under pressure, traders said.

Oil prices were carried higher as crude inventories were expected to far outpace analyst expectations.

West Texas Intermediate crude oil futures for October delivery shot up $1.29 to settle the day at $54.93.

North Sea Brent crude oil futures for October delivery finished at $59.51 after tacking on 81 cents.

Los Angeles-based independent oil and gas producer California Resources’ notes were pushed under.

The 8% senior secured notes due 2022 shaved off ½ point to close at 57¾ bid.

Denver-based producer Whiting’s issues were also under water.

The 6¼% senior notes due 2023 declined by ¾ point to close at 79½ bid. The 6 5/8% senior notes due 2026 fell 1 point to close at 73½ bid.

GTT falls

Elsewhere, GTT’s paper fell during the day’s activity, market sources said.

The 7 7/8% senior paper due 2024 slashed 3¾ points to close at 60 bid.

The McLean, Va.-based cloud networking services provider announced early Tuesday that chief financial officer Michael Sicoli would be leaving the position on Sept. 30, promising to remain a shareholder.

In its most recent earnings report, the company failed to meet analyst expectations and said that it would work to identify buyers for non-strategic assets.

Sinclair diverges

In the media space, Sinclair’s notes diverged during the day, traders said.

The Diamond Sports Group LLC/Diamond Sports Finance Co.’s5 3/8% senior secured notes due 2026 were active but finished level at 104¾ bid. The company’s 6 5/8% senior notes due 2027 added ½ point to close at 103½ bid.

The Hunt Valley, Md.-based TV broadcaster recently completed a $9.6 billion acquisition of 22 regional sports networks from Fox.

Indexes add

Three high-yield indexes showed additions by the close.

The KDP High Yield Daily index finished the day better by 7 basis points to 71.60 with the yield holding at 5.5%.

The index rose 2 basis points on Monday, gained 3 bps on Friday and 17 bps on Thursday.

The ICE BofAML US High Yield index gained 12 bps on Tuesday with the year-to-date return now at 10.785%.

The index edged up 6.6 bps on Monday, lost 9.9 bps on Friday and gained 13.7 bps on Thursday.

The 10% threshold was reached last Monday.

The CDX High Yield 30 index garnered 36.63 bps, landing at 105.9982 by the end of the Tuesday session.

The index improved by 35.41 bps on Monday, rose by 36.2 bps on Friday and gained 34.44 bps on Thursday.

© 2015 Prospect News.
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