Alta Mesa drops on bankruptcy; Mallinckrodt notes gain after second rating downgrade

By James McCandless

San Antonio, Sept. 12 – The distressed space saw a spike in volume during the Thursday session, with mostly positive movement.

Alta Mesa Resources, Inc.’s notes dropped after the company and its subsidiaries filed for bankruptcy.

As oil futures fell, Oasis Petroleum Inc.’s issues also dipped while California Resources Corp.’s paper diverged and Valaris plc’s notes rose.

Meanwhile, in the pharma space, Mallinckrodt plc’s issues gained despite receiving a second ratings downgrade this week.

Sector peer Teva Pharmaceutical Industries Ltd.’s paper moved in different directions.

Telecom name Frontier Communications Corp.’s notes shifted higher on increased attention.

Satellite operator Intelsat SA’s issues also rose.

In utilities, PG&E Corp.’s paper declined as the market continues to debate the company’s restructuring plan.

Alta Mesa drops

Alta Mesa’s notes dropped on Thursday, traders said.

The 7 7/8% senior notes due 2024 lost 3½ points to close at 15½ bid.

The Houston-based independent oil and gas producer announced on Thursday that it and many of its subsidiaries had filed for Chapter 11 bankruptcy.

The name’s midstream platform, Kingfisher Midstream, LLC and its subsidiaries, are not part of the Chapter 11 reorganization process, Prospect News reported.

The company said in SEC filings that the Chapter 11 process was the best way to reorganize its balance sheet quickly and sell assets.

The board of directors also approved several leadership changes, including the promotion of executive vice president Mark Castiglione to chief executive officer.

“The smaller producers continue to be targets for distressed guys,” a trader said.

Oil names vary

As oil futures saw a loss, distressed oil tranches saw varying movements, market sources said.

Houston-based producer Oasis Petroleum’s issues dipped.

The 6¼% senior notes due 2026 shed 1¾ points to close at 83¼ bid.

Los Angeles-based sector peer California Resources’ paper diverged.

The 6% senior paper due 2024 shot up 7¼ points to close at 49¼ bid. The 8% senior paper due 2022 fell 1 point to close at 55 bid.

London-based contract driller Valaris’ notes were seen rising.

The 5.2% senior notes due 2025 rose 1 point to close at 62 bid. The 7¾% senior notes due 2026 tacked on ¾ points to close at 66¼ bid.

West Texas Intermediate crude oil futures for October delivery slipped 66 cents to settle at $55.09 per barrel.

North Sea Brent crude oil futures for November delivery closed the day at $60.38 per barrel after a 43 cent loss.

Mallinckrodt gains

Meanwhile, in pharma, Mallinckrodt’s notes improved, traders said.

The 4 7/8% senior notes due 2020 added 1¼ points to close at 73¾ bid. The 5¾% senior notes due 2022 gained 1½ points to close at 42 bid.

On Thursday, S&P Global Ratings issued a downgrade for the Staines-upon-Thames, England-based drug producer.

Citing the company’s limited ability to access capital markets and uncertain exposure to opioid-related lawsuits, the agency lowered its long-term issuer rating and affirmed a negative outlook.

On Monday, Moody’s Investors Service issued its own downgrades.

As the industry faces a wave of lawsuits, each company’s ability to pay out settlements is being weighed by the market.

In the face of upcoming legal challenges, Mallinckrodt has hired restructuring advisers.

On Wednesday, news broke that sector peer Purdue Pharma had reached a blanket settlement with thousands of cities and states worth $10 billion to $12 billion.

Petach Tikva, Israel-based generics name Teva’s paper moved in different directions.

The 2.2% senior notes due 2021 improved by ¾ point to close at 94 bid. The 2.8% senior notes due 2023 lopped off 1½ points to close at 84½ bid.

Frontier, Intelsat rises

Telecom name Frontier’s notes shifted to a higher level, market sources said.

The 10½% senior notes due 2022 rose 1 point to close at 55½ bid. The 11% senior notes due 2025 added 1¾ points to close at 53¾ bid.

The two tranches combined to see about $77 million on the tape by the close.

The Norwalk, Conn.-based wireline communications name’s structure was heavily traded despite no news out.

In June, the company was reportedly considering a number of options to combat its upcoming maturity wall, with a restructuring on the table.

Luxembourg-based satellite name Intelsat’s issues were also better.

Intelsat Jackson Holdings SA’s 5½% senior notes due 2023 edged up ¼ point to close at 92½ bid. Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 picked up 2½ points to close at 81½ bid.

PG&E lower

PG&E’s paper saw a negative day, traders said.

The 6.05% bonds due 2034 shaved off ¼ point to close at 110¼ bid.

The market continues to weigh in on the San Francisco-based bankrupt electric utility’s reorganization plan that it filed on Monday.

A central part of the plan would cap wildfire liability payments at $18 billion.

The company plans to submit a more detailed plan by the end of this month.

© 2015 Prospect News.
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