Mallinckrodt notes rise after bankruptcy filing; AMC heads lower following cash warning

By James McCandless

San Antonio, Oct. 13 – Distressed debt trading focused on pharma and entertainment names on Tuesday.

Mallinckrodt plc’s notes spent the day on the rise a day after the company filed for Chapter 11 bankruptcy.

Sector peer Endo International plc’s issues trailed.

Elsewhere, theater chain AMC Entertainment Holdings, Inc.’s paper sank after warning that it would run out of cash at the end of the year barring a capital raise.

Movie theater name Cinemark Holdings, Inc.’s notes were also under pressure.

With industry weakness and stymied financial aid legislation as the backdrop, American Airlines Group, Inc.’s and United Airlines Holdings, Inc.’s issues varied in trading.

Meanwhile, in the oil and gas sector, Occidental Petroleum Corp.’s and Antero Resources Corp.’s paper diverged in direction while Gulfport Energy Corp.’s notes fell.

Mallinckrodt rises

Mallinckrodt’s notes spent the day on the rise, traders said.

The 5 5/8% senior notes due 2023 tacked on 2 points to close at 40 bid. The 5¾% senior notes due 2022 rose 2½ points to close at 41 bid.

About $38 million of the two tranches combined were on the tape.

On Monday, the Staines-upon-Thames, England-based drug producer filed for Chapter 11 bankruptcy, Prospect News reported.

The company said it filed bankruptcy to modify its capital structure, including restructuring some debt, and resolve several billion dollars of “otherwise unmanageable potential legal liabilities.”

At the end of the bankruptcy process, the company intends to emerge with $1.3 billion less debt and resolve any opioid-related claims.

As part of the proposed opioid settlement, claimants would receive $1.6 billion in structured payments and roughly 19.99% of the company’s fully diluted outstanding shares.

Moody’s Investors Service and S&P Global Ratings responded with requisite ratings cuts.

Dublin-based sector peer Endo’s issues trailed.

The 6% senior notes due 2028 shaved off ½ point to close at 77¼ bid.

AMC, Cinemark lower

Elsewhere, theater chain AMC’s paper declined on Tuesday, market sources said.

The 10½% notes due 2026 sank by 9¾ points to close at 64¼ bid. The 10½% paper due 2025 lost 2 points to close at 65½ bid.

Early Monday, the Leawood, Kan.-based movie theater chain said that it would face liquidity issues at the end of the year.

In a filing with the Securities and Exchange Commission, the company said that unless it can raise a “material” amount of cash by the end of 2020, it would run out of money.

Despite the company’s push to reopen a majority of its movie theaters, consumer demand has not caught up as coronavirus cases resurge.

AMC also reported that attendance in its locations is down 85% year over year.

Recently, S&P downgraded the company on its view that its liquidity would rapidly deteriorate over the following six months.

“The company is going to have to start dealing with the reality of the situation,” a trader said. “Unless someone puts more money in, they may have to restructure.”

Plano, Tex.-based operator Cinemark’s notes were also under pressure.

The 5 1/8% senior notes due 2022 gave up ½ point to close at 88¾ bid.

Airlines eyed

In the airline space, American Airlines’ issues varied in direction, traders said.

The 5% senior notes due 2022 held level to close at 70¼ bid. The 11¾% senior notes due 2025 chalked off 1 point to close at 100 bid.

With industry weakness and stymied negotiations over industry stimulus in the backdrop, the Fort Worth-based air carrier and its peers saw volatility.

On Tuesday morning, the company’s counterpart Delta Air Lines, Inc. reported a $5.4 billion loss for the third quarter, highlighting the pressure felt by the space as the coronavirus pandemic continues to deflate demand.

Also on Tuesday, analysts at Susquehanna downgraded the name to the equivalent of sell to neutral.

At the same time, negotiations between legislators and the Trump administration for a second round of stimulus have stalled, despite both parties on board with distributing another $25 billion to airlines for payroll protection.

Chicago-based travel name United Airlines’ paper also saw mixed results.

The 5% senior notes due 2024 dipped ¼ point to close at 89¼ bid. The 4¼% senior notes due 2022 picked up ½ point to close at 95½ bid.

Oil names diverge

Distressed energy names diverged in direction, market sources said.

West Texas Intermediate crude oil futures for November delivery shot up 77 cents to settle at $40.20 per barrel.

North Sea Brent crude oil futures for December delivery ended the session at $42.45 per barrel after a 73 cent pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s notes saw a divergence.

The 2.9% senior notes due 2024 closed level at 88 bid. The 2.7% senior notes due 2022 slipped ¼ point to close at 99¾ bid.

Denver-based producer Antero Resources’ issues also moved on separate tracks.

The 5 1/8% senior notes due 2022 slid 1½ points to close at 85½ bid. The 5 5/8% senior notes due 2023 rose 3¼ points to close at 79¾ bid.

Oklahoma City-based E&P Gulfport Energy’s paper fell.

The 6 5/8% senior notes due 2023 lost 1¼ points to close at 62½ bid. The 6% senior notes due 2024 dipped ½ point to close at 62½ bid.

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