Teva drops on negative outlook, government pressure; Dean lower on agency downgrade

By James McCandless

San Antonio, Aug. 14 – The distressed debt market saw a host of negativity on Wednesday as fears of a global economic downturn ignited a sell-off.

Teva Pharmaceutical Industries Ltd.’s notes dropped after receiving negative ratings and pressure from members of Congress.

Sector peer Mallinckrodt plc’s issues were positive.

Dairy name Dean Foods Co.’s paper was moving lower on its own ratings downgrade.

Meanwhile, utilities name PG&E Corp.’s notes slipped as the company fights to maintain control over its bankruptcy process.

In oil and gas, Sanchez Energy Corp.’s issues shifted lower as a noteholder group objected to the company’s request for debtor-in-possession financing.

Other energy names California Resources Corp., SM Energy Co., and Superior Energy Services, Inc.’s paper fell with oil futures.

Telecom name GTT Communications, Inc.’s notes were losing.

Teva drops, Mallinckrodt up

Pharma name Teva’s notes were dropping throughout the session, traders said.

The 2.8% senior notes due 2023 shed 2½ points to close at 81 bid. The 3.15% notes due 2026 fell 2¾ points to close at 72½ bid.

On Wednesday, Moody’s Investors Service revised its outlook on the Petach Tikva, Israel-based generic drug manufacturer to negative from stable.

The agency cited its high leverage and large refinancing needs as its exposure to opioid-related litigation increases.

The company has recently paid out multimillion settlements to California and Oklahoma, setting aside hundreds of millions of dollars in anticipation of more legal costs.

Concurrently, congressional leaders increased pressure by asking the company and others to disclose documents as part of its review of generic drug price movements.

In a joint letter to the companies, House Oversight Chairman Elijah Cummings, Democrat of Georgia. and United States. Senator Bernie Sanders Democrat of Vermont accused the names of stonewalling the inquiry.

“There was a lot weighing on them today,” a trader said. “I don’t see it letting up anytime soon.”

Staines-upon-Thames, England-based sector peer Mallinckrodt’s issues were positive, a bright spot of the day.

The 4 7/8% senior notes due 2020 added ½ point to close at 86 bid. The 5¾% notes due 2022 rose ¾ point to close at 61¾ bid.

Dean Foods down

In the food space, Dean Foods’ paper was moving lower, market sources said.

The 6½% senior paper due 2023 shaved off 1 point to close at 44½ bid.

The Dallas-based dairy product producer was another name receiving a cut from Moody’s on Wednesday.

The agency downgraded the company’s corporate family rating, probability of default rating and senior notes rating.

Moody’s cites the name’s weak operating performance over the last four quarters and the expectation of negative free cash flow for the entirety of 2019.

Recently, the company named a new chief executive officer as it tries to execute a turnaround in the face of falling sales in traditional milk.

PG&E slips

Meanwhile, utility PG&E’s notes slipped, traders said.

The 6.05% notes due 2034 slid ½ point to close at 112 bid.

On Monday, the San Francisco-based bankrupt electric utility said in a bankruptcy court filing that it expects to file a Chapter 11 plan by Sept. 9, Prospect News reported.

In the filing, the company argued that it was “uniquely positioned to retain the exclusive right to file a plan.”

The company has received a string of substantially similar equity capital commitments for reorganization plans from a number of entities.

Sanchez lower

Oil and gas name Sanchez Energy’s issues followed the market lower, market sources said.

The 6 1/8% senior notes due 2023 dipped ¼ point to close at 4 bid. The 7¾% notes due 2021 fell ¼ point to close at 3¾ bid.

In a filing with a Texas bankruptcy court, an informal committee of the Houston-based independent oil and gas producer’s noteholders objected to the company’s motion for approval of debtor-in-possession financing, Prospect News reported.

The committee claimed that its request to hold discussions with the company in order to protect its interests was ignored by the name.

On Monday, the company filed for bankruptcy with $175 million in commitments from some senior lenders.

Oil dives

Distressed energy names fell with oil futures as worries over a global economic slowdown compounded, traders said.

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

The 8% senior paper due 2022 declined by 2¾ points to close at 54 bid.

Denver-based sector peer SM Energy’s notes followed the day’s trend.

The 6 5/8% senior notes due 2027 gave back 2 points to close at 82½ bid.

Houston-based oilfield services provider Superior Energy’s issues were under water.

The 7 1/8% senior notes due 2021 dived 3¼ points to close at 67¼ bid. The 7¾% notes due 2024 lopped off 3½ points to close at 59 bid.

The oil sector was one of the hardest hit by the day’s negativity, spurred by several potential indicators of an economic downturn.

“Today felt like the start of a trend,” a trader said. “It really spooked some people. A lot of people weren’t buying distressed stuff.”

West Texas Intermediate crude oil futures for September delivery fell $1.87, settling the day at $55.23 per barrel.

North Sea Brent crude oil futures for October delivery ended at $59.48 per barrel after a $1.82 loss.

GTT loses

Telecom name GTT’s paper was seen losing, market sources said.

The 7 7/8% senior paper due 2024 dipped ½ point to close at 62 bid.

The McLean, Va.-based cloud networking services name’s structure was giving back some of Tuesday’s gains.

The company’s paper pushed higher on Tuesday after a regulatory filing disclosed that activist investor Dan Loeb’s hedge fund had increased its stock ownership to about 5.5%.

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