After results, Concordia sees big losses; Valeant rebounds after ‘whipsaw’ week; Neiman up again

By Colin Hanner

Chicago, March 15 – As the Federal Reserve raised interest rates by a quarter point on Wednesday, movement in the distressed market did little to react, as the biggest mover in distressed-land, pharmaceutical company Concordia International Corp., responded to disappointing fourth quarter results.

“They were really off today,” a trader said of Concordia bonds, which dropped by several points across multiple issues.

“The ongoing impact of financial and industry headwinds on the business, and the resulting erosion to our stakeholder value, have necessitated a reassessment of our business model,” said Allan Oberman, chief executive officer of Concordia, in a news release.

In the same sphere, Valeant Pharmaceuticals International Inc. rebounded a day following Bill Ackman’s hedge fund’s selloff of its entire equity stake in the Candian pharmaceutical company.

Elsewhere, a “nice bounce in oil” prices lifted some exploration and production companies, one of which, California Resources Corp., rose several points after falling crude oil prices had depressed the sector for several sessions.

Though U.S. retail sales figures had the smallest gain in a half-year in February – a 0.1% raise – Neiman Marcus Group, Inc. continued to feed off news that the retailer is the process of a deal that could end in an acquisition by Hudson’s Bay Co., a Candian outfit that owns Saks Fifth Avenue and Lord & Taylor.

An issue of iHeartCommunications, Inc.’s distressed notes traded down after the company announced it is beginning private exchange offers for five series of its priority and senior notes in connection with a debt restructuring, private coal company Murray Energy Corp. was up and several one-off names traded mixed on the mid-week session.

Results drop Concordia

Disappointing results from Concordia took a toll on the equity and distressed fronts for the Candian pharmaceutical company on Wednesday, a trader said.

The 9½% notes due 2022 were down 7 points to 30, the trader said, while the 7% notes due 2023 took the biggest hit with a 9½-point plunge to a 26 handle.

Rounding out the notes were the 9% notes due 2022, which were down 5¾ points to 78¼.

Concordia announced a consolidated revenue of $170.4 million for the quarter, a decrease of 8.1% from the previous quarter, according to a news release.

Edward Borkowski, chief financial officer of Concordia International, said the company will not be issuing full-year guidance for 2017, adding that “industry headwinds” would prevent the company from making an appropriate guidance.

The company has sufficient liquidity for at least the next year, Borkowski said, and has a $43 million of mandatory debt principal amortization payments for the 2017 year, according to an investor call transcript.

Yet, Borkowski did not leave restructuring or asset sales off the table as the company moves forward.

“These options may include, but are not limited to a refinancing or restructuring of the company's debt, the sale of assets or obtaining other sources of capital,” Borkowski said during the call.

Concordia’s stock was down 21 cents, or 9.59%, to $1.98.

Valeant rebounds

“They’ve been a whipsaw,” a trader said of Valeant Pharmaceuticals’ back-and-forth movement for the week, though Wednesday saw the upside for its bonds.

Valeant’s new issue – its 7% notes due 2024, which began its offering last Thursday – was up ¾ point to a 102¼ bid, a trader said.

Its existing 6 3/8% notes due 2020 were up 1 point to 90, a trader said.

And its 5½% notes due 2023 were up 1 point to 75¼.

After pricing a new deal last week, several existing issues traded down and losses were enhanced by the partisan divide over the newly introduced American Health Care Act and investor Bill Ackman’s Pershing Square hedge fund liquidation in its equity position in Valeant on Wednesday.

Oil bounces, as does E&P

The downturn in oil in recent memory did an about-face on Wednesday when oil future contracts were up several percentage points, lifting distressed names with it.

California Resources’ 8% notes due 2022 were up 3½ points to 81¾, a trader said, after plummeting by nearly the same amount on Tuesday.

Switzerland-based offshore driller Transocean Ltd.’s 6.8% notes due 2038 were up 2 points to 79.

And Candian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were up 1 point to 86.

April delivery for West Texas Intermediate crude was up 2.4% to $48.46 on the New York Mercantile Exchange on Wednesday.

Neiman still up on M&A talks

Dallas-based Neiman Marcus ticked higher for the second-consecutive session following reports that the high-end retailer was in talks with Hudson’s Bay, though sources in a Wall Street Journal article said it was “far from certain” a deal would be finalized.

Neiman’s 8% notes due 2021 were up 2½ points to 60½, a trader said, while the 8¾% notes due 2025 were up 2¾ points to 55¾.

The potential deal sought by Hudson Bay includes a takeover of Neiman, notwithstanding its $5 billion debt load, the Wall Street Journal reported.

Retail sales in the U.S. gained 0.1% in February, the U.S. Census Bureau reported on Wednesday.

Sales for January and February for department stores – excluding leased department stores operating within department stores – were down 7.3% compared to the same period in 2016.

Distressed roundup

After announcing it was holding exchanges for five series of notes, iHeartCommunications’ 9% notes due 2019 were down 1½ points to 77½, a trader said.

The company is offering to swap out its $1,999,815,000 of 9% priority guarantee notes due 2019, as well as four other swaps, for new notes that are seeking to reduce the company’s debt and obligations under its debt.

St. Clairsville, Ohio-based Murray Energy Corp.’s 11¼% notes due 2021 were up 1½ points to 79½, a trader said.

Montreal-based Resolute Forest Products Co.’s 5 7/8% notes due 2023 were up 1 point to 87¼.

And global shopper Navios Maritime Holdings Inc.’s 7 3/8% notes due 2022 were up 1¾ points to 75¾.

Susanna Moon contributed to this review

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