Mallinckrodt bonds stabilize in active trading; Bed Bath & Beyond under pressure

By Abigail W. Adams

Portland, Me., Sept. 30 – While the new deal pipeline and end-of-quarter clean-up were the primary focus of Thursday’s session, topical and earnings-related news sparked heavy volume and large price movements in some distressed debt names.

Following Wednesday’s tumble, Mallinckrodt LLC’s junk bonds were trading off their lows heading into Thursday’s close.

Bed Bath & Beyond Inc.’s capital structure was under pressure after the retailer reported disappointing earnings.

Meanwhile, distressed energy credits were quiet on Thursday with crude oil futures largely flat.

WTI Crude oil futures settled at $75.02, an increase of 19 cents or 0.25%, and Brent Crude oil futures settled at $78.52, a decrease of 12 cents or 0.15%.

Mallinckrodt stabilizes

Mallinckrodt’s junk bonds were trading off their lows heading into Thursday’s close after a bankruptcy judge’s ruling sent them into a downward spiral late Wednesday.

Mallinckrodt’s 5¼% senior notes due 2025 traded as low as 48 early in Thursday’s session, according to a market source.

However, the notes improved heading into the close and were trading on a 50-handle.

The pharmaceutical company’s 5 5/8% notes due 2023 traded as low as 47¾ on Thursday. However, they also stood poised to close the day on a 50-handle.

The 5 5/8% notes were the most active in the capital structure with $28 million in reported volume, a source said.

The notes dropped 8 to 10 points the previous session.

The notes tumbled after the bankruptcy judge overseeing the company’s case refused to throw out claims from insurers alleging the company was responsible for price gouging in relation to its drug Acthar.

Mallinckrodt, which was hard hit by opioid litigation, filed for bankruptcy protection in October 2020.

Bed Bath under pressure

Bed Bath & Beyond’s capital structure was under pressure on Thursday after the retailer reported disappointing numbers.

The 5.165% senior notes due 2044 sank about 4 points although the notes were “all over the place,” a source said.

They traded as low as 86 and as high as 89.9 during Thursday’s session but were changing hands in a range of 86 to 87 heading into the close, the source said.

Bed Bath & Beyond’s 3.749% senior notes due 2024 were down 1 5/8 points to close the day at 102.

The company’s stock sank more than 22%.

Bed Bath & Beyond reported a large earnings miss with earnings per share of 4 cents versus analyst expectations for earnings of 52 cents.

Revenue was $1.99 billion versus the $2.06 billion expected.

The company also slashed its forward guidance amid supply chain bottlenecks and a steep decline in customers.

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