Mallinckrodt notes lower after government files lawsuit; GTT improves on ratings shift

By James McCandless

San Antonio, March 3 – The distressed debt space focused on pharmaceutical and telecom tranches on Tuesday.

Mallinckrodt plc’s notes moved lower after news broke that the government filed suit against a subsidiary for allegedly defrauding Medicaid.

The 5¾% senior notes due 2022 fell 1½ points to close at 76 bid. The 5 5/8% senior notes due 2023 dipped 4½ points to close at 53½ bid.

Midday Tuesday, news broke that the U.S. government has filed a lawsuit against a subsidiary of the Staines-upon-Thames, England-based generic drug producer.

The government alleges that Mallinckrodt ARD LLC defrauded the Medicaid program by artificially inflating the price of Acthar Gel, one of its most popular drugs.

In the last fiscal year, the drug made up about 30% of its net sales.

Telecom company GTT Communications Inc.’s paper improved despite a ratings move that included a shift to a negative outlook.

The 7 7/8% senior notes due 2024 picked up ¾ point to close at 77 bid.

Moody’s Investor’s Service gave a B2 rating to the company’s new $140 million term loan while affirming the ratings on the company, its senior secured debt and its senior unsecured notes.

The agency also changed its outlook to negative from stable.

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