Mallinckrodt bonds drop after drawing down revolver; Whiting active on tender offer

By James McCandless

San Antonio, Aug. 29 – The distressed debt market continued to focus on pharmaceutical and energy names on Thursday.

Mallinckrodt plc’s notes dropped throughout the day after a subsidiary drew down the remaining balance of its revolving credit facility.

Sector peer Teva Pharmaceutical Industries Ltd.’s issues rebounded after days of declines.

Elsewhere, in energy, Whiting Petroleum Corp.’s paper was mixed in trading as the company announced a tender offer for its convertible securities.

Oil futures rose, followed by Chesapeake Energy Corp.’s notes while California Resources Corp.’s and Superior Energy Services, Inc.’s issues moved lower.

Retailer Bed Bath & Beyond Inc.’s paper shot up as unconfirmed merger talk swirled around the market on Thursday.

Department store chain J.C. Penney Co., Inc.’s notes diverged, with some securities moving upward while others headed lower, following a ratings downgrade.

Meanwhile, utilities name PG&E Corp.’s issues shifted upward.

Mallinckrodt drops

Mallinckrodt’s notes dropped in Thursday’s session, traders said.

The 4¾% senior notes due 2023 crashed 9¾ points to close at 39 bid. The 4 7/8% senior notes due 2020 shed 8¼ points to close at 79¾ bid.

Late Wednesday, a subsidiary of the Staines-upon-Thames, England-based pharmaceuticals maker drew down the remaining $95 million of the liquidity available on its revolver.

The company said that the increased liquidity puts it on better footing to “address cash needs that may arise in the future,” Prospect News reported.

“There’s just so much dragging all of these names down,” a trader said. “Mallinckrodt’s pushed itself into a corner.”

The name, as well as its industry, has come under increased scrutiny as legal challenges over the opioid epidemic permeate the space.

This week, news broke that competitor Purdue Pharmaceuticals was in talks to settle all litigation against it for a combined $12 billion while Johnson & Johnson was ordered to pay Oklahoma $572 million.

Petach Tikva, Israel-based sector peer Teva’s issues saw a rebound after days of negativity.

The 2.8% senior notes due 2023 picked up 1 point to close at 84½ bid. The 3.15% senior notes due 2026 added ½ point.

Whiting active

Elsewhere, in energy, Whiting Petroleum’s paper saw varied movements, market sources said.

The 6¼% senior notes due 2023, while pushing up to 79 bid during the day, ended unchanged at 78½ bid. The 6 5/8% senior notes due 2026 shaved off ¼ point to close at 75½ bid.

The Denver-based independent oil and gas producer announced on Thursday that it has started a tender offer to purchase up to $300 million of its $562,075,000 outstanding 1.25% convertible senior notes due 2020.

The company is offering to pay a cash amount equal to $990 per $1,000 principal amount of notes purchased, Prospect News reported.

After its most recent earnings report, the company’s debt structure was pushed further into distressed territory after posting weak numbers and laying off 33% of its workforce.

Oil futures rise

As oil futures gained, distressed energy tranches saw differing results, traders said.

Oklahoma City-based oil and gas producer Chesapeake Energy’s notes moved up.

The 8% senior notes due 2025 tacked on ¾ point to close at 77 bid. The 8% senior notes due 2026 gained 1¼ points to close at 72 bid.

Los Angeles-based peer California Resources’ issues went against the prevailing trend.

The 8% senior notes due 2022 slid ½ point to close at 57½ bid.

Houston-based oilfield services provider Superior Energy’s paper fell.

The 7 1/8% senior paper due 2021 lopped off 2¼ points to close at 70 bid. The 7¾% senior paper due 2024 lost ¼ point to close at 63¼ bid.

West Texas Intermediate crude oil futures for October delivery improved by 93 cents to settle at $56.71 per barrel.

North Sea Brent crude oil futures for October delivery finished at $61.08 per barrel after gaining 59 cents.

Bed Bath notes gain

In retail, Bed Bath’s longer-term notes shot up, market sources said.

The 5.165% senior notes due 2044 picked up 2 points to close at 70 bid. The 4.915% senior notes due 2034 gained 3¼ points to close at 76 bid.

The spike in the Union, N.J.-based retailer is based on an unconfirmed report that claims that the company has hired Goldman Sachs to facilitate bids for mergers.

The report also says that it has received “conditional offers” from Cost Plus World Market.

“Right now I’m skeptical,” a trader said. “It’s coming from one place and nowhere else. Usually if something like this happens somebody else will say something by the end of the day. But the market’s going to do what it does anyway.”

By the close, the report was not confirmed by the company or other outlets.

Bed Bath has been in turmoil of late, receiving pressure from an activist investor group to increase profitability.

In recent months, the company fired its chief executive officer, eliminated its chief operating officer position and cut its corporate staff by 7%.

J.C. Penney diverges

Elsewhere in the retail space, J.C. Penney’s issues diverged during the day, traders said.

The 8 5/8% notes due 2025 gained 1 point to close at 50¼ bid. The 5 7/8% senior secured notes due 2023 fell ½ point to close at 83 bid.

After the close on Wednesday, S&P Global Ratings downgraded the Plano, Tex.-based department store chain.

The agency lowered the company’s rating to CCC from CCC+ and affirmed a negative outlook, citing a higher risk for a distressed exchange as macroeconomic conditions become unfavorable over the next 12 months.

S&P expects the retailer to avoid bankruptcy with an out-of-court restructuring.

PG&E notes improve

Utilities name PG&E’s paper moved up on heavy trading, market sources said.

The 6.05% paper due 2034, considered the company’s flagship tranche, rose ¼ point to close at 109½ bid.

The San Francisco-based bankrupt electric utility’s structure has seen a run of negativity in the last few weeks after a bankruptcy judge ruled that wildfire victim claims against the company could proceed in court, exposing the name to an additional $18 billion in liabilities.

Next month, the company will submit its restructuring plan after having won the sole right to do so following challenges from creditors.

© 2015 Prospect News.
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