Junk primary market dormant; energy names rebound; Altice active; Mallinckrodt drops

By Abigail W. Adams

Portland, Me., Nov. 26 – The domestic primary market remained dormant on Monday with no new deals launching and nothing on the forward calendar.

While new deal activity continued to be sidelined by the volatility that roiled markets throughout late October and November, the secondary space was firm on Monday with equities in the green and crude oil futures rebounding.

The market was up about ¼ to ½ point on Monday, sources said.

With crude oil futures jumping more than 3% in intraday trading, energy names saw a slight rebound.

California Resources Corp.’s 8% senior secured second-lien notes due December 2022 were among the most actively traded issues in the secondary space with the notes up about ½ point, sources said.

Weatherford International Ltd.’s junk bonds also saw active trading and were up ¾ to 1 3/8 points.

Calpine Corp.’s 5¾% senior notes due 2025 also climbed alongside the broader energy sector.

Altice SA’s 7¾% senior notes due 2022 were active with the notes coming in after a post-earnings report jump last week.

Mallinckrodt plc’s junk bonds dropped in active trading on Monday after short-seller Citron Research claimed the pharmaceutical company failed to disclose unsuccessful clinical trial results.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw outflows of $2.191 billion for the week ended Nov. 21, according to fund-flow statistics generated by AMG Data Services Inc.

Primary dormant

The domestic primary market saw no new deals launch on Monday with the forward calendar remaining empty.

There is a potential pipeline of deals, but their execution largely depends on market conditions and issuer expectations, sources said.

Markets showed signs of a rebound on Monday, but this came after crude oil futures closed out Friday with a 10.69% drop on the week.

Energy in focus

The energy sector remained in focus on Monday as crude oil futures rebounded from last week’s lows.

California Resources 8% senior notes due 2022 were again among the most actively traded issues in the secondary space.

The notes were up ½ point. They were quoted at 79½ bid, 80½ offered and were seen trading between 79½ and 80, sources said.

More than $30 million of the bonds were on the tape by the late afternoon. The slight rebound comes after the 8% notes dropped 2½ points during Friday’s abbreviated session.

The barrel price of WTI crude oil for January delivery also saw a slight rebound on Monday after a more than 7% drop on Friday.

After climbing more than 3% in intraday trading, crude oil futures settled on Monday at $51.60, an increase of $1.18, or 2.34%.

Crude oil futures slid 7.71% on Friday to $50.42, closing the week down 10.69%.

Weatherford’s junk bonds were also buoyed by improving crude oil futures on Monday.

Weatherford’s 8¼% senior notes due 2023 were up 1 3/8 points to 63 3/8, a market source said. More than $15 million of the bonds were on the tape by the late afternoon.

Weatherford’s 9 7/8% senior notes due 2024 were up ¾ point to close Monday at 63¾.

Calpine’s 5¾% senior notes due 2025 also saw gains.

The notes were up 5/8 point, a market source said. They were trading around 91½ to 91 5/8.

Altice active

Altice SA’s 7¾% senior notes due 2022 continued to see active trading on Monday with the notes coming in from their gains following Altice Europe’s earnings report last week.

The notes were down ¼ point, a market source said.

They were trading between 89½ and 89¾.

With more than $31 million of the bonds on the tape by the late afternoon, the notes were major volume movers in the secondary space.

The notes were also major volume movers on Wednesday with the notes up 2 points after Altice Europe reported third-quarter earnings.

Altice Europe reported a 10.4% decrease in adjusted EBITDA in the third quarter and a 6.1% decrease in revenue, Reuters reported.

However, the company also reported an increase in customers in France with future growth anticipated.

Mallinckrodt drops

Mallinckrodt’s junk bonds dropped on Monday after short-seller Citron Research again targeted the specialty pharmaceutical company.

The 5¾% notes due 2022 dropped 1 point to 90 5/8 in active trading, a market source said. More than $23 million of the bonds were on the tape.

The notes were under pressure after short-seller Citron Research again targeted the company.

Citron Research claimed in a tweet that Mallinckrodt failed to disclose an unsuccessful clinical trial for its product Acthar, which accounts for 45% of the company’s revenue.

Mallinckrodt has been a popular target for Citron Research.

In June 2017, the pharmaceutical company and its product Acthar was the subject of another Citron Research report, which stated the drug was overvalued at its current price.

Indexes gain

Indexes started the week on strong footing and posted gains after all saw losses the previous week.

The KDP High Yield Daily index was up 2 basis points to close Monday at 68.14 with the yield now 6.66%.

The index dropped 8 bps to close Friday at 68.12. The index was flat last Wednesday, dropped 12 bps on Tuesday and 12 bps on Monday for a 32 bps drop on the week last week.

The index was down 78 bps on the week during the previous week.

The ICE BofAML US High Yield index gained 12.5 bps with the year-to-date return now negative 0.356.

The index dropped 13.1 bps on Friday, closing last week with a negative year-to-date return of 0.481.

The index gained 30.4 bps last Wednesday after dropping 31.5 bps on Tuesday and 12.3 bps on Monday.

The index was down 26.5 bps on the week last week.

The index dropped 130.6 bps on the week during the prior week.

Returns entered into negative territory for the first time since June on Nov. 15.

The CDX High Yield 30 index gained 20.12 bps to close Monday at 103.63.

The index was down 41.12 bps on Friday after gaining 42 bps last Wednesday. The index dropped 28 bps on Tuesday and was down 47 bps on Monday for a 74 bps drop on the week last week.

The index was down 137 bps the previous week.

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