Mallinckrodt down on price-gouging report; Walter Investment up on debt adviser news; California Resources drift

By Colin Hanner

Chicago, June 5 – In line with typical Monday sessions, activity was lighter in the distressed debt arena to start the week, though muted issues in recent times came to surface.

Staines-upon-Thames, England-based Mallinckrodt Pharmaceuticals became the target of Citron Research, a short-seller firm headed by Andrew Edward Left, on Monday. Citron released a report that accused the company of price gouging a drug, comparing it to the likes of Valeant Pharmaceuticals International Inc.

Two series of Mallinckrodt’s bonds were down by 1 point or more, and its stock was down several points.

On the other hand, mortgage servicing company Walter Investment Management Corp. was up on the session on substantial volume, a trader said. On Friday, the company said it had recently hired a financial debt restructuring adviser to support its debt restructuring initiatives, according to an 8-K filing with the Securities and Exchange Commission.

Elsewhere, California Resources Corp. “continued to drift,” a market source said, as West Texas Intermediate crude oil continued to leak in the broader market, falling below $47.50 a barrel.

Intelsat SA, largely in flux prior to and following the breakdown of an exchange offer last week, was again mixed on Monday in three series of notes, Frontier Communications Corp. stayed active in one of its issues and companies that saw increased activity a week prior saw few trades.

Mallin-crocked

Bonds of Mallinckrodt were lower because of a negative report by Citron Research on Monday that paid particular attention to the alleged price-gouging of Acthar, a drug that has cost patients more than $40,000 per vial in some cases.

Mallinckrodt’s 4¾% notes due 2023 were down 1 point to 87¾, a market source said, while its 5½% notes due 2025 were down 1 5/8 points to 90 5/8.

The Citron report, which compared Mallinckrodt to fellow pharmaceutical company Valeant, was picked up by several media sources and brought to light a conference call transcript with Express Scripts, a pharmaceutical benefit management service company, which acts on behalf of Mallinckrodt and other pharmaceutical companies to settle on drug prices.

“I personally told their management team their drug is hugely overpriced,” said Everett Neville, senior vice president of supply chain and specialty at Express Scripts, in the conference call.

The company’s stock was down $2.19, or 5.06%, to $40.49 on the day.

In the pharmaceutical sphere, other issues were seen down.

Seeing much less volume, Valeant’s 5 5/8% notes due 2023 were down 1/8 point to 82.

And Endo International plc’s 5 3/8% notes due 2023 were down 1¼ points to 88½.

Walter brings on advisers

Tampa, Fla.-based residential mortgage servicing company Walter Investment was higher in one of its issues nearly a week after it admitted that the company’s annual report and those for three separate quarters in the past year, “should no longer be relied upon” because of an accounting error.

In an 8-K filing on Friday, Walter said it was bringing on Weil, Gotshal & Manges LLP and Houlihan Lokey as its legal and investment banking debt restructuring advisers, respectively, as well as Alvarez & Marsal North America, LLC as its financial debt restructuring advisor.

Talks between Walter Investment and holders of the company’s 7 7/8% notes due 2021 have begun, including “discussions regarding the default under such financings arising” and “potential strategies and options for a viable near-term, comprehensive de-leveraging transaction,” the filing said.

Those 7 7/8% notes were up 1¼ points to 61¼ on the day, a trader said.

California Resources continues ‘drift’

A brief upsurge in crude oil during Monday’s morning session – caused by the decision of four Arab countries, including Organization of Petroleum Exporting Countries strongman Saudi Arabia, to cut diplomatic and economic ties with Qatar because of terrorism ties – melted into the afternoon, with West Texas oil settling lower yet again on Monday.

With it, California Resources’ 8% notes due 2022 were down 1 3/8 points to 72 5/8, a market source said.

Offshore driller Ensco plc, which was trading actively last week following news that it would acquire Atwood Oceanics Inc., was down 1 1/8 points in its 4½% notes due 2024, which settled at 81¾.

Distressed wrap

Intelsat’s subsidiaries were mixed on the day following a week of similar activity.

Intelsat Luxembourg Holdings SA’s 8 1/8% notes due 2023 were down ½ point to 51¾, a market source said, followed by Intelsat Connect Finance’s 12½% notes due 2022, which were down ¼ point to 88.

On the upside, Intelsat Jackson Holdings SA’s 7¾% notes due 2021 were up 1½ points to 54.

Frontier Communications Corp. 11% notes due 2025 were down ½ point to 92½.

Car rental company Hertz Corp., which saw increased trading following a new issue to the bond market last week, was down 1¼ points in its 6¼% notes due 2022, which finished at 83¼.

And Bristow Group Inc., which provides helicopter transport services mostly to the offshore energy drilling industry, was up ¼ point in its 6¼% notes due 2022, which settled at 61¼.

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