Gulfport notes lower after ratings downgrade; Mallinckrodt eyed on bankruptcy reports

By James McCandless

San Antonio, Oct. 9 – The distressed debt space ended the week with shifting ground in the energy and pharmaceutical spaces.

Gulfport Energy Corp.’s notes were sent lower after the company received a ratings downgrade at the end of Thursday.

With oil futures declining in the backdrop, Occidental Petroleum Corp.’s, Transocean Ltd.’s and Antero Resources Corp.’s issues varied in direction.

Meanwhile, pharmaceutical name Mallinckrodt plc’s paper diverged amid reports that the company is nearing a deal for bankruptcy.

In the travel space, American Airlines Group, Inc.’s notes saw mixed results while United Airlines Holdings, Inc.’s issues fell.

Elsewhere, property owner Uniti Group Inc.’s paper drifted apart as CBL & Associates Properties, Inc.’s notes weakened.

Gulfport weakens

Gulfport Energy’s notes were sent lower as the week concluded, traders said.

The 6 5/8% senior notes due 2023 declined by ¼ point to close at 63¾ bid. The 6% senior notes due 2024 dipped 1 point to close at 63 bid.

After the close on Thursday, the Oklahoma City-based independent oil and gas producer received a ratings downgrade from S&P Global Ratings.

The agency lowered its senior unsecured notes to CCC- from CCC+ and the recovery rating was 3.

S&P said that the cut reflects its view that the company faces an increased financing risk as a credit facility comes due in the next year, arguing that it would have problems amending and extending the facility given the leverage profile.

The agency also affirmed a negative outlook and said that there could be a further drop in the name’s borrowing base.

“If energy prices continue this slow climb, the company’s position for refinancing could improve,” a trader said.

Oil names vary

With oil futures declining in the backdrop, distressed energy names moved on separate tracks, market sources said.

West Texas Intermediate crude oil futures for November delivery dipped 59 cents to cap the week at $40.60 per barrel.

North Sea Brent crude oil futures for December delivery ended the session at $42.85 per barrel after a 49 cent slip.

Houston-based producer Occidental Petroleum’s issues varied in direction.

The 2.9% senior notes due 2024 closed level at 88 bid. The 2.7% senior notes due 2022 garnered ½ point to close at 97 bid.

Steinhausen, Switzerland-based contract driller Transocean’s paper was also pulled apart.

The 7½% senior notes due 2031 gave back 1½ points to close at 13½ bid. The 6½% senior notes due 2020 pushed up 2¾ points to close at 92 bid.

Denver-based E&P Antero Resources’ notes were mixed.

The 5 1/8% senior notes due 2022 tacked on 2¾ points to close at 87 bid. The 5 5/8% senior notes due 2023 lost ½ point to close at 76½ bid.

Mallinckrodt diverges

Meanwhile, pharmaceuticals name Mallinckrodt’s issues diverged, traders said.

The 4¾% senior notes due 2023 were docked 1 point to close at 13 bid. The 10% notes due 2025 gained 1½ points to close at 77 bid.

Late Friday, reports indicated that the Staines-upon-Thames, England-based drug producer is closing in on a deal for a potential bankruptcy filing.

As part of the deal, the company reportedly would hand over majority ownership to its unsecured bondholders.

Holders of the unsecured notes would exchange the debt for a majority of new equity and some new paper while higher-ranking lenders would receive new securities.

Headlines have been swirling around the name concerning a potential Chapter 11 bankruptcy filing for months since legal challenges stemming from the opioid epidemic emerged.

In its most recent earnings report, Mallinckrodt bested analyst estimates for the second quarter with a $1.89 per share profit and $700.9 million in revenues.

Airlines eyed

In the transportation space, American Airlines’ paper saw mixed results, market sources said.

The 5% senior notes improved by ¼ point to close at 70¼ bid. The 11¾% senior paper due 2025 lost ¼ point to close at 100½ bid.

This week, the Fort Worth-based airline’s structure was in focus as the federal government revamped negotiations for a stimulus package for the industry.

During Thursday’s session, U.S. House speaker Nancy Pelosi, D.-Calif., said that the proposed second round of $25 billion would only pass if it was bundled with a broader stimulus package.

“I think the edges have been smoothed over, but only a little,” a trader said. “I guess it depends on the next tweet.”

Earlier in the week, president Donald Trump suddenly announced a halt on all coronavirus stimulus negotiations.

Later that same day, he said that he would approve separate bills on different factors.

The first $25 billion in payroll aid for the industry expired on Oct. 1, leading American Airlines to furlough thousands of workers.

Chicago-based carrier United Airlines’ notes fell.

The 5% senior notes due 2024 were docked ½ point to close at 89½ bid. The 4¼% senior notes due 2022 declined by ¼ point to close at 95 bid.

Uniti little moved

Elsewhere, property owner Uniti’s issues drifted apart, traders said.

The 8¼% senior notes due 2023 closed level at 99½ bid. The 7 7/8% senior notes due 2025 edged ¼ point higher to close at 107¼ bid.

In the second half of the week, the Little Rock, Ark.-based real estate investment trust received two ratings upgrades.

On Wednesday, Moody’s Investors Service lifted the company’s corporate family rating, probability of default rating and issue level ratings.

The next day, S&P Global Ratings raised the company’s issuer credit rating and issue-level ratings and removed all ratings from CreditWatch.

Both agencies made the changes after Uniti’s largest customer, Windstream, exited bankruptcy and settled all legal claims.

Meanwhile, Chattanooga, Tenn.-based mall name CBL’s notes weakened.

The 5¼% senior paper due 2023 shed ¼ point to close at 38 bid.

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