GEO notes edge lower; CoreCivic up; Mallinckrodt better; energy bonds trade mixed

By Cristal Cody

Tupelo, Miss., March 24 – GEO Group Inc.’s bonds headed out modestly softer in the secondary market following the company’s downgrade by S&P Global Ratings on Wednesday.

The company’s 5 1/8% senior notes due 2023 (B1/B-) fell about ½ point to 88½ bid in heavy secondary trading, a source said.

GEO’s 6% senior notes due 2026 (B1/B-) were quoted down less than ½ point at 71½ bid.

S&P downgraded the company by two notches to B, citing potential difficulty in paying or refinancing $1.7 billion of debt maturing in 2024, as well as debt due in 2022 and 2023.

In January, president Joe Biden instructed the U.S. Department of Justice to not renew contracts with privately operated prison operators.

Justice Department detention facility contracts with GEO accounted for about 27% of its 2020 revenue, S&P noted.

GEO Group announced in January that the federal contract for the company’s Moshannon Valley Correctional Facility in Pennsylvania will expire on March 31.

The contact generated about $42 million in annual revenue for GEO, which said it expects to market the facility to other federal and state agencies.

S&P also cut the rating on CoreCivic, Inc., formerly known as the Corrections Corp. of America, by one notch to BB- on Wednesday over a less supportive operating environment and about $1 billion of debt that starts maturing in 2023.

CoreCivic’s 4¾% notes due 2027 (Ba1/BB-) improved about ½ point to the 89½ bid range over the day, a market source said.

Mallinckrodt improves

In other distressed secondary trading on Wednesday, bankrupt pharmaceuticals maker Mallinckrodt plc’s bonds mostly gained, a market source said.

Mallinckrodt’s 4¾% senior notes due 2023 were seen at 20½ bid, up from 16¼ bid on Tuesday and better than where the issue traded in the 15 bid area in the same session last week.

The company’s 5 5/8% notes due 2023 were quoted at 64 bid, up ½ point from the same session a week ago.

Mallinckrodt filed for Chapter 11 bankruptcy in October in the U.S. Bankruptcy Court for the District of Delaware.

The company announced earlier in March that it reached an agreement with a group of first-lien term lenders holding about $1.3 billion of its outstanding first-lien term loans to support its restructuring support agreement.

Mallinckrodt received approval on Feb. 25 to extend filing a bankruptcy restructuring plan until Aug. 9.

Transocean gains

Market tone remained mixed Wednesday, though oil prices recovered after sinking in the prior session.

The iShares iBoxx High Yield Corporate Bond ETF rose 5 cents, or 0.058%, to $86.51.

North Sea Brent crude oil futures for May deliveries, which dropped $3.83 on Tuesday, settled Wednesday up $3.62 at $64.41 a barrel.

West Texas intermediate crude oil futures for May deliveries recovered $3.42 to settle at $61.18 after declining $3.80 in the previous session.

Distressed energy bonds were mixed in lighter secondary activity, a source said.

Offshore driller Transocean Inc.’s 11½% senior guaranteed notes due 2027 (Caa3/CCC) climbed to 86 bid after declining 3 points to 84¼ bid in the prior session and trading down 1½ points on Monday.

Talen Energy Supply LLC’s 6½% senior notes due 2025 (B3/CCC+/B) traded about ¼ point softer on the day at 81¼ bid.

Diamond Sports down

Elsewhere, Diamond Sports Group LLC’s bonds were mostly flat to softer, a source said.

The company’s 6 5/8% senior notes due 2027 (B3/CCC-) fell ½ point on Wednesday to 57 bid, down 2 points from the same session last week.

Moody’s Investors Service downgraded the notes earlier in March.

Parent company Sinclair Broadcast Group, Inc. reported in February soft guidance for the sports broadcast group and an interest in liability management initiatives that could include a debt exchange or redemption.

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