Valeant existing bonds continue slide, even as new paper up; energy still weak, but drillers rebounding

By Paul Deckelman

New York, March 13 – The new week opened in the distressed-debt world on Monday featuring many of the same names that had dominating the proceedings last week.

Traders saw continued active dealings in the big new two-part offering from Canadian drugmaker Valeant Pharmaceuticals International Inc., with those bonds again firming in aftermarket dealings.

However, Valeant’s existing paper remained on the slide, pushed lower in the wake of the new deal and on investor fears about possible changes in healthcare laws in the United States, particularly as it relates to the pharmaceutical sector.

Energy issues such as California Resources Corp. and EP Energy Corp. also remained lower, in line with yet another decline in world crude oil prices Monday, albeit that oil price easing was considerably smaller than some of the downturns in the commodities markets seen last week.

However, not everything in the energy patch was down; traders saw better levels on such oil-drilling names as Noble Energy Inc. and Transocean Ltd.

Elsewhere, communications satellite company Intelsat SA’s paper was a mixed bag on Monday, with some issues seen gaining altitude, but others across its capital structure losing ground.

Retailer Neiman Marcus Group, Inc.’s lately weakened paper was seen rebounding.

New Valeant paper better

As had been the case on Friday, Valeant Pharmaceuticals International’s big new two-part issue was right at or near the top of the junk market’s Most Actives list on Monday.

A trader saw the problem-plagued Laval, Que.-based drugmaker’s new 7% notes due 2024 just a shade below 102 bid, calling them up 3/32 point, with over $35 million traded, making it the busiest junk credit of the day.

He saw its 6 3/8% notes due 2020 around 101 15/16 bid, also a gain of 3/32 on the day, with more than $14 million having traded.

A second trader saw both issues in a 101½ to 101¾ bid context, calling them “just off slightly, on “active” volume.

Valeant had priced its $3.25 billion deal – upsized from $2.5 billion originally announced, making it the biggest deal the junk market has seen so far this year – on Thursday, consisting of $1.25 billion of 6 ½% notes due 2022 and $2 billion of 7% notes due 2024.

Both halves of that regularly scheduled forward calendar megadeal priced at par and then moved sharply higher. Friday’s trading saw volumes of $80 million and $158 million, respectively.

Existing Valeants continue slide

Away from the new deals, Valeant’s existing paper continued to lose ground on Monday, just as it had throughout most of last week.

Its 6 3/8% notes due 2020 dropped by 1 full point, to 90½ bid, a trader said, with over $29 million moving around.

He saw its 6 1/8% notes due 2025 sliding by 2¾ points, to 74¾ bid, with over $19 million traded.

And its 5 7/8% notes due 2023 swooned by 2¼ points to the 75 bid level, with over $10 million traded.

The bonds had begun their retreat after the company announced its plans for its big new deal.

On top of that, traders noted that Valeant’s bonds were also hit by investor angst about the healthcare sector in general, prompted by Washington developments, as Congressional Republicans introduced their bill to repeal the existing Obamacare law in the U.S. – and as President Donald Trump’s tweets indicated that he was looking for a substantial rollback in drug prices as part of his planned healthcare overhaul.

Oil issues easier

Traders saw names of many energy companies off, such as Los Angeles-based exploration and production company California Resources.

A trader saw its benchmark 8% notes due 2022 down 7/8 point at 81 bid, while a second pegged those bonds at 80¾ bid, down 1 full point on the day, with over $12 million traded.

Sector peer EP Energy’s 8% notes due 2025 dropped to 90 bid, a loss of 1¾ points on the day.

Traders noted the continued retreat of oil prices, although they said that these were less on Monday than they had been last week.

West Texas Intermediate crude was off by 9 cents per barrel, to $48.40, in Monday dealings on the New York Mercantile Exchange, its sixth consecutive daily loss.

Drilling names improve

However, traders saw that energy drilling names, recently in retreat as oil prices fell sharply last week, were better on Monday.

One saw Houston-based driller Noble Energy’s 5¼% long bonds due 2042 “actually rebounding” at 63¾ bid, up 1¼ point on the day, while its 6.05% paper due 2041 rose nearly 2 points to 69 ¾ bid.

He said of Noble that “boy, that one has been under some pressure lately.”

Switzerland-based sector peer Transocean Ltd.’s 9% notes due 2023 firmed by 1½ points Monday to end at 105 bid, with over $10 million traded.

Intelsat issues turn mixed

After having been higher pretty much all around on Friday, traders saw Luxembourg-based communications satellite company Intelsat’s paper mixed on Monday.

A trader called its Intelsat Jackson Holdings SA 5½% notes due 2023 down ¾ point, to 85 bid.

However, he saw its Intelsat (Luxembourg) Holdings SA 8 1/8% notes due 2023 up 5/8 point at 62 5/8 bid, while its 7¾% notes due 2021 gained ¼ point at 62¾ bid.

Another trader saw the Intelsat Jackson 8% notes due 2024 off by 5/16 point, at 105 7/8 bid, while its 7¼% notes due 2020 slipped by 1 3/8 point, to 92 1/8 bid, both on volume of over $10 million.

Neiman-Marcus better

A trader said that Neiman Marcus, “which has been trading off, had a little rebound today,” quoting the Dallas-based upscale department store operator and catalogue retailer’s 8% notes due 2021 up nearly 1 point on the day at 54¾ bid.

Another trader saw them get as good at 55¾ bid, on volume of some $12 million.

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