Exela crashes on disappointing earnings; Mallinckrodt lower amid lawsuit news

By James McCandless

San Antonio, Aug. 9 – The Friday session in the distressed space saw continued focus on earnings releases, capping off the week in the same way it began.

Exela Technologies, Inc.’s notes crashed in the session after the company released worse-than-expected earnings.

Meanwhile, in pharma, Mallinckrodt plc’s issues were trending lower after news broke of insurance giant Humana Inc. filing a lawsuit against the name.

Sector peer Teva Pharmaceutical Industries Ltd.’s paper diverged.

Utilities name PG&E Corp.’s notes varied in direction after it issued its results for the second quarter.

In energy, Whiting Petroleum Corp.’s issues declined in the face of a ratings downgrade.

As oil futures recovered some of the week’s losses, California Resources Corp.’s, Chesapeake Energy Corp.’s and Superior Energy Services, Inc.’s paper moved in different directions.

Chemicals producer Rayonier Advanced Materials Inc.’s notes pushed lower.

Exela crashes

Exela’s notes spent the Friday session diving, traders said.

The 10% senior secured notes due 2023 dived 11½ points to close at 57½ bid.

By the close, the 10% notes had seen about $49 million on the tape.

The notes are trading at their lowest levels since their issuance, according to market data.

After the Thursday close, the Irving, Texas-based business software provider released worse-than-expected second quarter earnings.

The company reported a 22 cents per share loss, wider than the expected 5 cents per share loss.

Revenues were $390.2 million, representing a 4.9% decline over the same period last year.

Mallinckrodt lower, Teva mixed

Meanwhile, in the pharma space, Mallinckrodt’s issues were trending lower, market sources said.

The 4 7/8% senior notes due 2020 fell 2½ points to close at 87½ bid. The 5¾% notes due 2022 dropped 6¼ points to close at 59½ bid.

On Friday, news broke that insurance provider Humana has filed a lawsuit against the Staines-upon-Thames, England-based drug manufacturer.

The company stands accused of inflating the price of multiple sclerosis drug Acthar by more than 97%.

“It’s par for the course for pharmaceuticals at this point,” a trader said.

The industry is facing outsized legal pressures stemming mainly from alleged culpability in the opioid epidemic.

Earlier this week, the name reported second-quarter numbers, beating analyst estimates with a $2.53 per share profit.

Revenues were $823.3 million.

Petach Tikva, Israel-based sector peer Teva’s paper diverged during the day.

The 2.8% senior paper due 2023 lost ½ point to close at 85½ bid. The 3.15% paper due 2026 held level at 76½ bid.

PG&E mixed

Utilities name PG&E’s notes varied in direction, traders said.

The 6.05% notes due 2034, considered the bellwether of the structure, held level at 113 bid. The 3¼% senior notes due 2023 jumped up 4¼ points to close at 98¾ bid.

The San Francisco-based bankrupt electric utility was another name to put out its second-quarter numbers, releasing them on Friday morning.

The company showed a profit of $1.10 per share, surpassing predictions of 97 cents per share.

Revenues were underwhelming at $3.94 billion.

Overall, it reported a $2.6 billion loss and warned of more losses related to wildfire charges.

Facing about $30 billion in liability charges stemming from recent wildfires in California, the name filed for bankruptcy in January.

Recently, the company committed to paying an initial $4.8 billion into a $21 billion wildfire claim fund established by the state.

Whiting declines

In energy, Whiting Petroleum’s issues were in decline, market sources said.

The 6 5/8% senior notes due 2026 took off 1½ points to close at 82½ bid. The 6¼% notes due 2023 lost 1 point to close at 85 bid.

S&P Global Ratings issued a downgrade for the Denver-based independent oil and gas producer on Friday.

The agency lowered the company’s rating to BB- from BB, cut its senior secured debt rating and issue-level rating.

The downgrades were in reaction to its “disappointing operational and financial results.”

Last week, the company reported a worse-than-expected 28 cents per share loss and announced that it was laying off 254 of its administrative staff.

Oil names vary

As oil futures were recovering some of the week’s losses, distressed oil tranches saw non-cohesive movement, traders said.

Los Angeles-based producer California Resources’ paper was mixed.

The 6% senior paper due 2024 finished flat at 47 bid. The 8% paper due 2022 added 1 point to close at 56 bid.

Oklahoma City, Okla.-based peer Chesapeake Energy’s notes gained during the day.

The 8% senior notes due 2025 improved by 2 points to close at 80¾ bid.

Houston-based oilfield services provider Superior Energy’s issues also varied in direction.

The 7 1/8% senior notes due 2021 lost 1 point to close at 71 bid. The 7¾% notes due 2024 tacked on ½ point to close at 64 bid.

West Texas Intermediate crude oil futures for September delivery gained $1.96 to settle at $54.50 per barrel.

North Sea Brent crude oil futures for October delivery ended the session at $58.53 per barrel after a $1.15 shift upward.

Rayonier lower

Chemicals name Rayonier’s paper trended lower, market sources said.

The 5½% senior notes due 2024 fell ¼ point to close at 74 bid.

The 5½% notes are trading at their lowest levels in four years, according to market data.

This week, the Jacksonville, Fla.-based chemicals producer was one of many names to release its second-quarter earnings.

The company reported a loss of 35 cents per share where analysts had expected an 18 cents per share loss.

Factors for the loss were namely weakness in its sector and low prices on its core commodities.

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