Mallinckrodt notes move lower as market reacts to spinoff news; Neiman Marcus down on sales report

By James McCandless

San Antonio, Dec. 7 – At the end of the week, the distressed-debt market saw mixed trading, varying from sector to sector.

Mallinckrodt plc’s notes continued to move lower after the company announced a spinoff of its generic medications segment on Thursday.

Elsewhere in the pharmaceutical space, Teva Pharmaceutical Industries Ltd.’s issues improved.

In retail, Neiman Marcus Group Inc.’s paper fell after the company reported a loss for the first quarter.

Meanwhile, J.C. Penney Co., Inc.’s notes gained.

In the energy sector, Sanchez Energy Corp.’s notes saw a slight recovery as the market continues to react to its news of starting a strategic alternatives review.

A rise in oil futures spurred positivity for California Resources Corp., Denbury Resources Inc. and EP Energy Corp.’s issues.

After days of declines, Ferrellgas Partners LP’s paper took a positive turn.

Mallinckrodt lower

Mallinckrodt’s notes extended a negative trend, traders said.

The 4¾% notes due 2023 lost 1¾ points to close at 75 bid.

On Thursday, the 4¾% notes dropped 6¾ points.

The Staines-Upon-Thames, U.K.-based drug-maker announced on Thursday that it would be spinning off its specialty generic drug arm to shareholders.

The transaction is expected to be completed by the midpoint of 2019, but the company has expressed an interest in selling the unit before then.

On Friday, Moody’s Investors Service said that the news does not impact Mallinckrodt’s ratings and that the plan for the spinoff is credit negative.

Elsewhere, Petach Tivka, Israel sector peer Teva’s issues rose.

The 3.15% notes due 2026 gained ½ point to close at 81 bid. The 4.1% notes due 2046 also picked up ½ point to close at 70 bid.

Neiman Marcus falls

Meanwhile, Neiman Marcus’ paper traded down, market sources said.

The 8% paper due 2021 slid 1 point to close at 48 bid. The 7 1/8% paper due 2028 fell 1¼ points to close at 70¼ bid.

On Thursday, the Dallas-based luxury retailer reported a $28.2 million loss in the first quarter despite a 2.8% rise in sales.

The company’s restructuring talks with its creditors recently hit a snag after it announced plans to transfer e-commerce segment MyTheresa into private equity, setting off noteholders’ worries of restrictions in potential collateral.

Plano, Texas-based department store chain J.C. Penney’s notes gained.

The 8 5/8% notes due 2025 added ¾ point to close at 59½ bid.

Sanchez recovers

In the energy space, Sanchez Energy’s issues saw a slight recovery, traders said.

The 6 1/8% notes due 2023 picked up 1 point to close at 21 bid. The 7¾% notes due 2021 gained 2 points to close at 25 bid.

On Thursday, the 6 1/8% notes dropped 6¼ points and the 7¾% notes fell 8 points.

The Houston-based independent oil and gas producer announced Thursday that it was beginning a strategic alternatives review.

The company has hired Moelis & Co. LLC, a restructuring expert, to help with the review.

“The writing’s been on the wall all year,” a trader said. “They haven’t been meeting their own targets and they had to act soon.”

As the week ended with a gain for oil futures, popular oil tranches were higher.

Los Angeles-based peer California Resources’ 8% paper due 2022 rose 2 points to close at 77½ bid.

Houston-based peer Denbury Resources’ notes also improved.

The 5½% notes due 2022 picked up 3 points to close at 77½ bid. The 6 3/8% notes due 2021 gained 1 point to close at 83 bid.

Houston-based producer EP Energy’s 8% notes due 2024 gained 3½ points to close at 89½ bid.

At the end of the Friday session, West Texas Intermediate crude oil futures rose $1.12 to close at $52.61 per barrel.

North Sea Brent crude added $1.61, ending the day at $61.67 per barrel.

Ferrellgas positive

Away from oil, Ferrellgas’ paper improved, market sources said.

The 6¾% paper due 2022 jumped 3¾ points to close at 85½ bid. The 6¾% paper due 2023 gained 1½ points to close at 84½ bid.

The Overland Park, Kan.-based propane name’s issues have been under negative pressure after a recent series of negative headlines.

The company suspended quarterly cash distributions and its chief financial and operating officers left their posts.

“Unless, by some miracle people start buying propane in droves, then I think they’re headed for the bottom,” a trader said.

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