Mallinckrodt notes gain after Q3 earnings release; Hexion issues mixed on earnings rumblings

By James McCandless

San Antonio, Nov. 6 – The distressed space continued to see activity concentrated on names with recent earnings results in Tuesday’s session.

Mallinckrodt plc’s notes improved after the company surpassed earnings estimates in its third-quarter report issued Tuesday.

Elsewhere in the healthcare space, Community Health Systems, Inc.’s issues were mixed.

Meanwhile, Hexion Inc.’s paper also saw mixed results as the private company issued its third-quarter report.

In energy, PHI, Inc.’s paper moved higher as the company continued to search for refinancing solutions. The company received a ratings downgrade after the close.

Sanchez Energy Corp.’s notes continued to fall elsewhere in the space.

Sector peer Denbury Resources Inc.’s issues improved. Other peers California Resources Corp. and Ensco plc’s paper saw declines.

Telecom name Frontier Communications Corp.’s notes were also mixed.

Mallinckrodt gains

Mallinckrodt’s notes were rising, traders said.

The 4¾% notes due 2023 gained 1 point to close at 83¾ bid.

On Tuesday morning, the Staines-Upon-Thames, U.K.-based drug maker issued its third-quarter earnings report, showing a $2.10 per share profit, beating analyst expectations of $1.80 per share.

The company also reported $640 million in revenue.

“It’s definitely one of the bright spots of the season, at least on the distressed side,” a trader said.

Elsewhere in healthcare, Community Health’s issues were mixed.

The 7 1/8% notes due 2020 lost 1¼ points to close at 85¼ bid. The 6 7/8% notes due 2022 picked up ¼ point to close at 51¾ bid.

The 6 7/8% notes have been trading around a 50 context since Mallinckrodt released its third-quarter earnings on Oct. 29, according to Trace data, when the company reported a $1.64 loss per share.

Hexion mixed

Hexion’s paper was mixed, market sources said.

The 9% paper due 2020, while rising as high as 54 bid, ended level at 53½ bid, according to Trace data. The 6 5/8% paper due 2020 rose ½ point to close at 86 bid.

The Columbus, Ohio-based chemicals producer released its third-quarter earnings Tuesday, though they were not immediately available as the company is private.

“Those numbers will probably spill out over the next week,” a trader said.

The notes took a spill on Monday amid a growing concern that second-lien noteholders will lose out in upcoming debt talks with the company.

PHI rises

PHI’s notes gained, traders said.

The 5¼% notes due 2019 added ½ point to close at 87 bid.

At the close Tuesday, Standard & Poor’s lowered the Lafayette, La.-based offshore air services name’s issuer credit rating, issue level rating and affirmed a negative outlook.

The move came after the company terminated a cash tender offer for the $500 million outstanding of the 5¼% notes after only receiving commitments for $400 million.

The company, under advisement from Houlihan Lokey, is looking for strategic refinancing alternatives.

Houston-based sector peer Sanchez Energy’s 6 1/8% notes due 2023 fell 2½ points to close at 36 bid.

“That seems to be the trend for Sanchez lately,” a market source said.

Denbury, another Houston-based producer, saw its paper improve.

The 5½% paper due 2022 jumped 1¾ points to close at 88¼ bid. The 6 3/8% paper due 2021 rose ½ point to close at 93½ bid.

The company is expected to refinance a $400 million senior secured second-lien bridge loan with high yield bonds in order to finance its $1.7 billion acquisition of Penn Virginia Corp., Prospect News reported.

Los Angeles-based producer California Resources’ notes fell.

The 6% notes due 2024 shed ½ point to close at 80½ bid. The 8% notes due 2022 dropped ¾ point to close at 89¾ bid.

London-based contract driller Ensco’s 5¾% bonds due 2044 lost 2¼ points to close at 68½ bid.

Frontier mixed

Frontier’s issues also ended the day mixed, market sources said.

The 7 5/8% notes due 2024 gained ¾ point to close at 61½ bid. The 10½% notes due 2022 fell ½ point to close at 83½ bid. The 11% notes due 2025, while trading their way up to 76¾ bid in intraday trading, fell back to Monday’s level of 74 bid.

The Norwalk, Conn.-based wireline telecom name released better-than-expected earnings after the close on Tuesday, showing a 7 cents per share loss against analyst predictions of a 23 cents per share loss.

“That’ll have an effect tomorrow and the rest of the week,” a trader said. “But Frontier was a top trader today.”

© 2015 Prospect News.
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