Mallinckrodt notes rise on second-quarter earnings beat; Valaris up in energy space

By James McCandless

San Antonio, Aug. 4 – Distressed debt trading focused on the pharmaceutical and energy sectors on Tuesday.

Mallinckrodt plc’s notes rose during the session after beating expectations for its second-quarter earnings report.

Sector peer Endo International plc’s issues improved.

In the energy space, Valaris plc’s paper gained ground after amending its credit agreement and its forbearance agreements on several notes.

As oil futures edged higher, Occidental Petroleum Corp.’s notes followed suit while Whiting Petroleum Corp.’s and Antero Resources Corp.’s issues varied in direction.

Meanwhile, household products marketer Tupperware Brands Corp.’s paper declined by the end of the session.

United Airlines Holdings, Inc.’s notes marked the day with gains as American Airlines Group Inc.’s issues were relatively active but unchanged.

Mallinckrodt, Endo rise

Mallinckrodt’s notes were seen rising during the Tuesday session, traders said.

The 5 5/8% senior notes due 2023 gained 2½ points to close at 18¼ bid. The 5¾% senior notes due 2022 tacked on 3 points to close at 20½ bid.

On Tuesday morning, the Staines-upon-Thames, England-based pharmaceutical producer released its second-quarter earnings results.

The company reported earnings per share of $1.89 per share, better than the analyst consensus of $1.25 per share.

Revenues came in at $700.9 million, also beating analyst expectations.

The company also said that a write-down for one of its most popular products, ongoing opioid litigation, its existing debt and other pressures may force it to file for Chapter 11 bankruptcy.

“The stock was getting shredded, though the bonds were better,” a trader said.

Mallinckrodt’s debt outstanding was pegged at $5.29 billion.

Dublin-based sector peer Endo’s issues also improved.

The 6% senior notes due 2023 moved up ¼ point to close at 80¼ bid.

Valaris edges higher

In the energy space, Valaris’ paper gained ground, market sources said.

The 7¾% senior notes due 2026 added ¼ point to close at 6¼ bid. The 5¾% senior paper due 2044 pushed up ½ point to close at 6 bid.

Late Monday, the London-based contract driller amended its credit agreement waiver and its note forbearance agreement, both dated July 15, Prospect News reported.

The waiver, the third one reached so far, waives any default under the revolver attributed to any failure by the company to make interest payments due on Aug. 15 with respect to its subsidiaries’ 7 7/8% senior notes due 2040 and 6 7/8% senior notes due 2020.

Valaris amended its forbearance agreement dated July 15, 2020 with respect to the 2022 notes, the 2024 notes, the 2025 notes, the 2042 notes and the 2044 notes.

The company skipped its $12.7 million interest payment due on July 31 for its Ensco Jersey Finance Ltd. 3% exchangeable senior notes due 2024 and the roughly $11.7 million interest payment due on July 31 on its 8% senior notes due 2024.

Oil trends up

As oil futures edged higher, distressed energy names trended the same way, traders said.

West Texas Intermediate crude oil futures for September delivery rose 69 cents to cap the day at $41.70 per barrel.

North Sea Brent crude oil futures for October delivery settled at $44.43 per barrel after a 28 cent pickup.

Houston-based independent oil and gas producer Occidental Petroleum’s notes followed futures upward.

The 2.9% senior notes due 2024 ticked up ¼ point to close at 94¼ bid. The 2.7% senior notes due 2022 rose ¼ point to close at 97 bid.

Denver-based producer Whiting Petroleum’s issues varied in direction.

The 6¼% senior notes due 2023 chalked off 2 points to close at 17 bid. The 6 5/8% senior notes due 2026 improved by ¼ point to close at 18 bid.

Antero Resources, another Denver-based E&P, saw its paper diverge.

The 5 1/8% senior notes due 2022 were docked ¼ point to close at 80¼ bid. The 5 5/8% senior paper due 2023 shot up 4¼ points to close at 75¾ bid.

Tupperware declines

Meanwhile, housewares seller Tupperware’s notes declined, market sources said.

The 4¾% senior notes due 2021 moved down ¼ point to close at 91¼ bid.

The Orlando, Fla.-based company’s notes saw a third straight trading day of weakness following news that a law firm is investigating disclosure statements released in March for potential fraud in Tupperware’s operations.

In its most recent earnings report, earnings per share of 84 cents and revenues of $397.4 million beat predictions.

As Tupperware grapples with how to handle its debt profile, the company has issued a going-concern warning.

Airlines active

The travel sector saw United Airlines’ issues mark the day with gains, traders said.

The 5% senior notes due 2024 rose 1¼ points to close at 85 bid. The 4¼% senior notes due 2022 pushed up ½ point to close at 89½ bid.

The airline space, including the Chicago-based carrier, has seen positivity over the last few days after U.S. travel regulators reported an uptick in the average number of air travelers.

Officials at the Transportation Security Administration reported 686,360 daily average travelers in the last week ended Sunday.

That number represents an increase from 660,931 and 664,022 from the previous two weeks.

Fort Worth-based airline American Airlines’ paper was relatively active but unchanged.

The 5% senior notes due 2022 held level to close at 58 bid.

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