Distressed pharma bonds drop as Purdue settlement cleared; Endo off; Mallinckrodt mixed

By Cristal Cody

Tupelo, Miss., March 9 – Distressed pharmaceutical paper mostly softened on Wednesday as news reports emerged that a $6 billion opioid-related settlement with Purdue Pharma owners received court approval.

A hearing on a motion to authorize the new settlement was held on Wednesday in the U.S. Bankruptcy Court for the Southern District of New York.

The agreement with members of the Sackler family and eight states and the District of Columbia was announced in the prior week and follows after an earlier settlement was overturned on appeal in December.

Endo International plc’s bonds continued to see heavy trading on Wednesday with the notes about ¾ point to over 2¾ points lower.

Mallinckrodt plc’s paper was mixed with the 5¾% senior notes due 2022 down 1¾ points following the company’s agreement earlier in the week to settle Medicaid violations for $260 million.

Distressed secondary supply was mostly concentrated in the emerging markets space in Russia and Ukraine issuers, including PJSC Lukoil Oil Co.’s notes that traded about 5½ points higher on Wednesday, a source said.

Oil gave back some of the heavy gains seen since Russia’s invasion of Ukraine began, while market volatility dropped over 10% by the afternoon as more global companies moved to close or scale back operations in Russia.

On Tuesday, president Joe Biden announced a ban on U.S. imports of Russian oil, natural gas and coal.

Oil prices dropped about $15 to nearly $17 over the session.

West Texas Intermediate crude oil benchmark futures for April deliveries declined $15 to settle Wednesday at $108.70 a barrel.

The Chicago Board Options Exchange’s CBOE Volatility index was down 8.68% at 32.08 by the day’s close.

Stocks saw recovery with the Dow Jones industrial average up 2% and the Nasdaq 3.59% higher.

The iShares iBoxx High Yield Corporate Bond ETF improved 67 cents to $82.20.

Endo notes decline

Endo’s paper softened in heavy trading action with the 9½% senior secured notes due 2027 (Caa2/CCC+) among the most active distressed issues in the secondary market on Wednesday.

Endo Finance LLC’s 9½% senior secured notes due 2027 (Caa2/CCC+) fell over ¾ point to just under the 93 bid range on $30.5 million of volume, a source said.

Endo’s 6% senior notes due 2028 (Caa3/CCC-) were over 2¾ points lower at 60 bid in thin supply of $3 million during the session.

Endo International in the prior week reported a fourth-quarter loss.

The Dublin-based pharmaceuticals maker continues to face opioid-related lawsuits, including a Tennessee state court default judgment against its subsidiaries regarding opioid-related claims in 13 counties.

Endo most recently reported a $65 million opioid-related settlement with Florida in January.

Mallinckrodt mostly soft

Mallinckrodt’s 5¾% senior notes due 2022 slid 1¾ points to 49¼ bid on Wednesday, a source reported.

The issue saw $2.5 million of volume.

The company’s paper has been thinly traded as it moves toward exiting Chapter 11 bankruptcy.

The 4¾% senior notes due 2023 were up 1½ points to 37½ bid in light supply over the day.

Mallinckrodt’s 5½% senior notes due 2025 were last seen on Tuesday flat at 51 bid.

The U.S. Justice Department announced on Monday the company agreed to pay $260 million to resolve allegations of Medicaid violations.

Mallinckrodt’s reorganization plan that resolves all opioid-related lawsuits against the Dublin- and St. Louis-based pharmaceutical company was confirmed in February.

Distressed returns dip

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return declined to minus 0.59% on Tuesday from minus 0.2% on Monday.

Month-to-date total returns widened to minus 1.81% versus minus 1.23% in the prior session.

Year-to-date index returns were down at minus 5.1%, compared to minus 4.54% on Monday.

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