Endo notes gain on bankruptcy news; Mallinckrodt improves; Bausch drops; Lannett flat

By Cristal Cody

Tupelo, Miss., Aug. 17 – Endo International plc’s notes mostly climbed in the secondary market on Wednesday in the wake of the company’s announcement that it filed for Chapter 11 bankruptcy and will seek to sell all or substantially all of its assets.

Distressed trading in the pharmaceutical space also spread to other issuers during the session, according to market sources.

Mallinckrodt plc’s 10% senior secured first-lien notes due 2025 (B3/B) recovered ½ point on Wednesday after losing 1 point the previous day.

The pharmaceutical manufacturer’s notes declined last week following a weak second-quarter earnings report following its exit from Chapter 11 bankruptcy in June.

Bausch Health Cos. Inc.’s 9¼% senior notes due 2026 (Caa2/CCC/B) lost 2¼ points on Wednesday after dropping 1¼ points on Tuesday and ¾ point on Monday.

Generic drugmaker Lannett Co., Inc.’s 7¾% senior secured notes due 2026 (B3/B-) were active but flat and have seen thin trading in August and over the summer.

Market tone overall was mostly weak on Wednesday with stock indices down and volatility edging up as minutes from the Federal Reserve’s last monetary policy meeting were digested, sources said.

The iShares iBoxx High Yield Corporate Bond ETF shed 81 cents, or 1.03%, to finish the day at $77.62.

The CBOE Volatility index rose 1.07% to 19.90.

Also in the health care space, Toledo Hospital has been slipping into distressed news with the investment-grade-rated company doing business as ProMedica Health System, Inc. starting to feature on fallen angel watchlists, sources report.

Toledo Hospital’s 5.325% senior secured notes due 2028 (Baa3/BB) softened ½ point on Wednesday and were yielding over 10% with the paper down more than 15 points this month.

Bankrupt Endo notes higher

Endo’s bonds mostly traded higher in the distressed market after the company announced Wednesday that it filed for Chapter 11 bankruptcy, a source said.

Endo Finance LLC’s 9½% senior secured second-lien notes due 2027 (Ca/D) traded heavily during the session and went out at 27 bid, up 4 5/8 points.

Endo Finance’s 6% senior notes due 2028 (C/D) were flat at 5½ bid.

Endo Luxembourg Finance Co. Sarl’s 6 1/8% senior secured first-lien notes due 2029 (Caa2/D) were moving at 85½ bid, 1¼ points higher on the day.

Endo subsidiary Par Pharmaceutical Inc.’s 7½% senior secured first-lien notes due 2027 (Caa2/D) also saw heavy trading on Wednesday. The notes were quoted ending the session at 85¼ bid, more than 1 point better from Tuesday.

Endo said that it filed in the U.S. Bankruptcy Court for the Southern District of New York and entered into a restructuring agreement with the Ad Hoc First Lien Group made up of certain creditors holding more than 50% of its outstanding secured debt.

The ad hoc group will serve as the stalking horse bidder as Endo “seeks to sell all or substantially all of its assets,” according to the 8-K filing with the Securities and Exchange Commission.

Endo said the stalking horse bidder will bid for the assets in exchange for wiping out more than $5.8 billion of debt, while the agreement also “contemplates that the purchaser will fund one or more trusts for parties with opioid-related claims against the company.”

The bankruptcy filing comes after the 30-day grace period in connection with Endo’s missed $1.9 million payment due July 15 on its 5 3/8% senior notes due 2023 expired Monday.

The Dublin-based pharmaceuticals company earlier in August posted a second-quarter loss of $1.89 billion, compared to a loss of $15.5 million last year.

Mallinckrodt edges up

Mallinckrodt’s 10% senior secured first-lien notes due 2025 (B3/B) recovered ½ point on Wednesday to trade at 88½ bid after losing 1 point the previous day, a market source said.

The notes are down from 97½ bid the same day a week ago.

Mallinckrodt on Thursday reported second-quarter losses more than doubled from a year ago.

The Dublin- and St. Louis-based pharmaceutical company exited Chapter 11 bankruptcy in June.

Lannett unchanged

Lannett’s 7¾% senior secured notes due 2026 (B3/B-) finished the day flat at 33½ bid in thin trading, a source said.

The notes have been thinly traded over the summer.

The Philadelphia-based generic pharmaceutical manufacturer faces a revenue decline of 25% to 30% in fiscal 2022 amid a competitive pricing environment, according to a S&P news release.

Bausch paper lower

Bausch’s 9¼% senior notes due 2026 (Caa2/CCC/B) traded lower again on Wednesday, moving out 2¼ points to 70 bid by the close, a source said.

The notes declined 1¼ points on Tuesday and ¾ point on Monday.

Bausch Health’s paper has been under pressure since the Laval, Quebec-based pharmaceutical company reported earlier in August that second-quarter revenue was down, though net losses were lower.

Toledo Hospital off

Toledo Hospital’s 5.325% senior secured notes due 2028 (Baa3/BB) softened ½ point on Wednesday to 78 bid and a yield of more than 10%, a source said.

The notes, down 3 points this week, opened August at better than 94 bid.

S&P Global Ratings lowered the ratings on the Ohio-based health care company’s notes to junk from AA on Aug. 9.

Distressed index softens

S&P U.S. High Yield Corporate Distressed Bond index one-day total returns softened on Tuesday to 0.05% from 0.47% on Monday.

Month-to-date total returns remained higher at 4.54% on Tuesday, compared to 4.49% in the prior session.

Year-to-date total returns also were improved at minus 17.07% during the day from minus 17.11% on Monday.

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