Diamond Sports declines; Mallinckrodt gets bump; PBF, Talen up; China Evergrande lower

By Cristal Cody

Tupelo, Miss., Oct. 14 – Diamond Sports Group LLC’s notes fell 1 point to 1½ points in strong secondary action on Thursday with the notes under pressure this week following parent Sinclair Broadcast Group Inc.’s report of additional funding discussions.

In other distressed action, Mallinckrodt LLC’s bonds climbed about 2¼ points to 3½ points during the session.

Market focus on Thursday was on the heavy round of third-quarter earnings reports out with strong profits boosting equities, while Treasury yields pulled back.

The iShares iBoxx High Yield Corporate Bond ETF jumped 49 cents to $87.37.

Oil prices also climbed as reports warn of heavy energy demand going into winter.

West Texas Intermediate crude oil benchmark futures for November deliveries settled Thursday up 87 cents at $81.31 a barrel.

Oil prices are at seven-year highs, and European gas prices are up around 400% this year, according to a S&P Global Ratings report on Thursday.

S&P said the agency has raised its oil and gas price assumptions used to access corporate credit quality.

“These revisions likely won't result in wholesale upgrades for oil and gas producers, though we could raise some speculative-grade ratings,” S&P said.

Energy-related bonds in the distressed space mostly were higher on Thursday.

Petroleum refiner PBF Holding Co. LLC’s notes traded up about ½ point and were holding onto gains made in the prior week.

Talen Energy Supply LLC’s 10½% senior notes due 2026 (B3/CCC/B-) were quoted Thursday slightly better on the week at 55¾ bid, a source said.

The Woodlands, Tex., and Allentown, Pa.-based power company’s notes moved at 55, 54 last week.

Elsewhere, China’s distressed property developer space remained under pressure.

“Credit prospects in China have become more uncertain,” S&P said in a Thursday market notice.

China Evergrande Group’s paper was seen off about 3/8 point and trading with a handle in the low 20s on Thursday.

“The bonds have continued trading down,” a market source said. “They’re fairly unchanged to down 3/8 point on the day. But overall, they keep testing new lows.”

Diamond Sports softens

Diamond Sports’ 5 3/8% senior secured notes due 2026 (Caa1/CCC) traded 1 point weaker, going out Thursday at 59½ bid, a source said.

Secondary supply totaled $19 million.

The notes are down 3 points on the week.

Diamond Sports’ 6 5/8% senior notes due 2027 (Ca/CC) also fell 1½ points to 36¾ bid on $7.5 million of trading volume on Thursday.

The notes are 3¼ points weaker from where the issue went out in the prior week.

Sinclair Broadcast reported on Oct. 7 that it made a new Sept. 28 proposal to secure new funding for the Chesapeake, Va.-based sports broadcast subsidiary.

The latest offers follow Sinclair’s report in June that it made two proposals dated March 22 and April 29 to lenders and noteholders of Diamond Sports.

Mallinckrodt better

Mallinckrodt’s 5 5/8% notes due 2023 (D) traded up 2¼ points to 47¾ bid by the close on Thursday, a market source said.

Trading was light with $1 million of supply.

The company’s 5½% notes due 2025 (D) jumped 3½ points to head out at 48 bid on $3 million of secondary volume during the session.

The pharmaceuticals company’s bankruptcy hearing is ongoing in the U.S. Bankruptcy Court for the District of Delaware.

The company faces opioid-related lawsuits, including a lawsuit from New York that is moving through the bankruptcy court.

Mallinckrodt, based in Dublin and St. Louis, filed for Chapter 11 on Oct. 12, 2020.

PBF trades up

PBF’s 6% senior notes due 2028 (Caa1/B/B+) improved about ½ point to around the 72 bid area in “mainly odd lots” on Thursday, a source said.

“There’s not a lot of movement this week but they were at 65, 64 last week, so they’re up,” the source said. “But that’s with the whole energy rally.”

The Parsippany, N.J.-based issuer’s 6% notes ended the prior week over 9 points better at 75 bid.

Evergrande weaker

China Evergrande’s 8¼% senior notes due 2022 (C/C/C) were quoted about 3/8 point weaker in light trading on Thursday with the bonds now trading at 22 bid, a market source said.

The notes were quoted down 1½ points on Wednesday at 22¾ bid.

The Shenzhen, China-based real estate developer is in a 30-day grace period following missed bond payments in September and additional payments due Tuesday.

Distressed index negative

Distressed index returns softened on Wednesday, according to the latest data available.

The S&P U.S. High Yield Corporate Distressed Bond index’s one-day total returns declined to minus 0.1% from 0.08% on Tuesday.

Month-to-date total returns softened to minus 0.2% versus minus 0.1% in the session following the Columbus Day holiday.

Year-to-date total returns fell to 29.97% on Wednesday from 30.1% the day prior.

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