Intelsat notes higher after FCC satellite talk; Mallinckrodt active after beating Q4 earnings estimates

By James McCandless

San Antonio, Feb. 27 – After a long stretch of lower volume, traders reported an increase in activity across the board on Tuesday for the distressed debt market.

Intelsat SA saw its notes climb higher after Federal Communications Commission chairman Ajit Pai made comments about changes to the country’s 5G network.

Issues in Mallinckrodt plc were heavily traded again as the company reported better than expected fourth quarter earnings.

Toys “R” Us, Inc. paper traded up in high volume after reports confirmed talks of a sell-off of its Asia business.

Frontier Communications Corp. added to the volume in the telecom space. A slight drop in oil futures drove activity in distressed energy companies California Resources Corp. and Northern Oil and Gas, Inc. The retail sector was also active with Revlon, Inc. notes.

Intelsat jumps on 5G talk

After reports confirmed that FCC chairman Ajit Pai discussed plans to improve the speed of the country’s 5G network, notes in Luxembourg-based satellite communications company Intelsat traded up in high volume. This was the second day the company’s notes climbed after Monday’s announcement of a $90 million loss for the fourth quarter and a $178.7 million loss for the year.

Pai announced plans to hold an auction for access to radio airwaves in the 24 and 28 gigahertz bands starting in November.

“The FCC head was talking about some gigahertz changes that could be made,” a trader said. “Those changes would be beneficial to Intelsat and other satellite names.”

The Intelsat Jackson SA 5½% notes due 2023 traded up 2¾ points to close at 83¾ bid. The 7¼% notes due 2022 rose more than 3 points to close at about 93¾ bid.

Mallinckrodt beats estimates

Issues in Britain-based drug maker Mallinckrodt spiked after it was announced Tuesday morning that the company had fourth quarter earnings of $1.61 billion, above what many analysts had predicted, according to a market source. Issues have remained in high volume after the recent announcement that Mallinckrodt had completed the acquisition of Rockville, Md.-based medical applications name Sucampo Pharmaceuticals for $1.2 billion.

The 4¾% issues due 2023 gained more than 4 points to close at about 82½ bid.

Toys ‘R’ Us active on sell off talks

Wayne, N.J.-based bankrupt toy retailer Toys “R” Us paper was active, according to a trader, after reports confirmed that the company is in talks to sell 85% of its stake in its Asia business to Hong Kong businessmen Victor and William Fung, who own the minority stake in the business.

“There was a lot of talk about what that unit of the business could be worth today, and that drove much of the trading,” a market source said. “At the end of the day, most people seem to be settling at the $1 billion range.”

The 8¾% paper due 2021 rose more than 2 points to close at 14½ bid. The 7 3/8% paper due 2018 jumped up more than 5¾ points to close just above 16 bid.

Volume favorites active

Elsewhere in distressed telecom, Norwalk, Conn.-based wireline telecom name Frontier Communications maintained its high volume. The company’s notes have been active since positive changes were announced to its credit agreements.

The 7 5/8% notes due 2024 climbed 2½ points to close at 64 bid. The 10½% notes due 2022 rose almost 2 points to close at 86½ bid. The 11% notes due 2025 jumped up 1¾ point to close at 79½ bid.

As oil futures took a slight dip Tuesday, distressed energy names became active.

Los Angeles-based independent oil and gas name California Resources had its 6% issues due 2024 drop about 1½ point to close at 61½ bid. The 8% issues due 2022 lost more than 1½ point to close at below 80½ bid.

Minnetonka, Minn.-based independent oil and gas producer Northern Oil and Gas saw its 8% paper due 2020 fall about 2½ points to close just above 91½ bid.

Another distressed retail name in the mix was New York City-based cosmetics producer Revlon. Its issues have been on an active and positive trend since announcing the departure of CEO Fabian Garcia.

The 5¾% notes due 2021 edged up about ¼ point to close near 81¾ bid. The 6¼% notes due 2024 rose 1 point to close at 70 bid.

“Today felt busier,” a trader said. “But it is definitely situational. There were some companies active on earnings reports and other news. Whether that activity is sustained will be born out over the next week or so.”

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