Valeant Pharma loses, then surges in late afternoon; healthcare down; oil bonds follow OPEC speculation

By Colin Hanner

Chicago, Nov. 1 – Distressed debt-land echoed the dismal declines of equities on Tuesday – through continuing oil declines and supply cut talks – though news for Valeant Pharmaceuticals International Inc. provided a jolt in late afternoon trading.

On Monday, Valeant went under the microscope after reports surfaced that its ex-chief financial officer and former chief executive officer are the subjects of a criminal probe relating to possible accounting fraud.

The company’s stock fell 12% that day but rebounded more than 30% on Tuesday afternoon after a report came out saying that Valeant may sell Salix Pharmaceuticals, its gastroenterology and endocrinology medical company, to Takeda Pharmaceuticals for $10 billion.

“It was a bit of a rollercoaster [for Valeant] today,” one trader said.

Another trader said Valeant notes were “flying” on Tuesday after the news came out with less than an hour of trading left for the day.

The company’s 6 1/8% notes due 2025, which were trading down at 77 earlier on Tuesday, sprung up 5 points “in 30 minutes” to 82½, according to several traders.

“Other [notes] were active but did not have the same pop [as the 6 1/8% notes],” a trader said.

Valeant’s 7½% notes due 2021 were up 2¾ points to 91¾, a market source said.

The 5 3/8% notes due 2020 were “not as extreme,” trading at 84, a market source said, commenting that those notes finished around the same levels that they had been.

Health and hospitals

“Hospital and healthcare bonds continued to drift,” a market source said on Tuesday, news that furthered a pattern since late last week when Community Health Systems Inc. announced disappointing preliminary quarterly results.

A trader saw the 8% notes due 2019 down 1¾ points to 85, and the company’s 5 1/8% notes due 2021 down 1 point to 93 3/8.

Another market source said the 6 7/8% notes due 2022 were down 3½ points to 73.

Community Health’s plunge comes on the heels of that of Pfizer, the U.S.’s largest drugmaker, which announced a 38% fall in profit for the third quarter.

Concordia International Corp. saw a 1 point decline in its 9½% notes due 2022, which traded at 60¾, one trader said.

In energy

After taking a nosedive on Monday, oil continued its slump Tuesday to its lowest levels in more than a month amid uncertainty surrounding the Organization of Petroleum Exporting Countries’ ability to come to a consensus about supply cuts later this month in Vienna.

Crude production, in response to OPEC talks, will fall 800,000 barrels a day this year, according to the Energy Information Administration’s Adam Sieminski.

“Oil stabilized after being down yesterday,” one trader said, though oil futures fell on the day after showing signs of a gain in early trading.

West Texas Intermediate crude was down 43 cents, or 0.92%, to $46.43.

Brent crude was down 64 cents, or 1.32%, to $49.47.

California Resources Corp.’s 8% notes due 2022 traded down 1 point to 67½, a trader said.

Dropping for the second-straight day was Linn Energy, whose 7¾% notes due 2021 were down 3¼ points to 30½, and following just behind for biggest energy decliner of the day was MEG Energy Corp., which saw a 2-point weakening to 82¼ in its 7% notes due 2024.

After announcing on Friday that it will suspend quarterly cash distribution to unitholders to preserve liquidity and expand operational and financial flexibility, Memorial Production Partners LP saw mixed movement on Tuesday.

One market source said its 6 7/8% notes due 2022 were up 1 point to 41, while the 7 5/8% notes due 2021 were down ½ point to 42.

S&P also lowered the company’s corporate credit rating to CCC- from B-, citing that Memorial Production “could undertake a distressed exchange for its senior unsecured notes within the next months,” according to credit analyst Christine Besset in a news release.

Peabody Energy Corp. was down a ½ point, mostly trading in the “44½ context” on 6½% notes due 2020, a trader said.

“Aside from [Peabody], coal was on the quiet side today,” the same trader said.

Round up

Intelsat SA’s Jackson-linked 5½% notes due 2023 were down ½ point to 66, a trader said, while another trader said the 7¼% notes due 2020 were down 2 points to 73 from 75, and its 7¼% notes due 2019 were down 1 point to 79.

A separate market source said the 7¼% notes due 2019 were down 2¼ to 79¼.

Navios Maritime Holdings Inc.’s 8 1/8% notes due 2021 traded at 75¾, down ¼ point a market source said.

Teen accessory retailer Claire’s Inc., which plunged last week after announcing quarterly earnings, saw an increase in its 9% notes due 2019, a 1¼ point uptick to 48½, a trader said.

Clear Channel Communication Inc., or iHeartMedia Inc., 14% notes due 2021 were down 1½ points to 37, several traders said.

“There was softness in the higher coupon bonds,” a trader said. “[iHeart] was down about ½ point across the board.”

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