Mallinckrodt notes in high demand on acquisition news; Hexion issues remain high in volume amid rumors

By James McCandless

San Antonio, Feb. 13 – Trading volume in the distressed debt market is rising slowly but surely, traders said, as markets continue to take a breather from last week’s volatility.

Mallinckrodt plc notes were heavily traded on the news that it had acquired medical applications company Sucampo Pharmaceuticals.

With rumors still being floated about a potential sell-off, issues in Hexion, Inc. remained in high volume.

Revlon, Inc. continued to dominate the distressed retail space. Its paper has been trending positively on the recent news that the company had parted ways with its chief executive officer.

In telecom, Frontier Communications Corp. and Intelsat SA continued high volume trading. Rex Energy Corp. and Northern Oil and Gas, Inc. were the main movers in a slower day for the energy sector.

Mallinckrodt acquires Sucampo

Reports confirmed Tuesday that Britain-based pharmaceutical maker Mallinckrodt had completed the acquisition of Sucampo Pharmaceuticals, Inc., a Rockville, Md.-based drug maker. In a release, Mallinckrodt chief executive officer and president Mark Trudeau praised the deal that was originally announced in December.

"We are pleased to complete our acquisition of Sucampo, bringing near-term net sales and earnings accretion while bolstering our pipeline," he said.

A trader described the deal as ambitious, but not without its faults.

“The deal comes with a bit of legal baggage,” the trader said. “Some of the stakeholders didn’t agree on the sale price and that’s still being worked out in court. That might be part of the reason the notes have dropped off over the last few days.”

The 4¾% notes due 2023 fell to close at 77¼ bid.

Hexion rumors continue

While not officially confirmed, traders said that issues in Columbus, Ohio-based chemical name Hexion were traded for a third day on rumors that sponsor Apollo Global Management is considering selling off parts of the company.

“There has not been any official word on who a buyer would be,” a trader said. “But all you have to do is look who could potentially want into Hexion’s market, which is producing resin.”

The 9% issues due 2020 traded down 1½ point to close at 81 bid. The 6 5/8% issues rose slightly to close at about 93 1/8 bid.

Revlon reverses

New York City-based cosmetics producer Revlon paper lost some of yesterday’s gains, a market source confirmed. Its paper has been trending upward since the departure of CEO Fabian Garcia. It will try to focus on generating more online sales in order to increase revenues.

The 5¾% paper due 2021 fell 2 points to close around 78½ bid. The 6¼% paper due 2024 lost about ¾ point to close at 64½ bid.

Telecom and oil trades

Distressed telecom names took up much of Tuesday’s volume, traders said. Norwalk, Conn.-based wireline telecom Frontier Communications notes were mixed. The company recently announced positive changes to its credit agreements.

The 7 5/8% notes due 2024 lost 3¾ points to close at about 57½ bid. The 10½% notes due 2022 rose ¾ point to close just below 82 bid. The 11% notes due 2025 fell off ½ point to close at 74 bid.

Luxembourg-based satellite communications company Intelsat’s 5½% issues due 2023 fell 1 point to close at about 76¼ bid. The Intelsat Jackson SA 7¼% notes due 2020 fell more than ¼ point to close under 86 bid.

Issues in State College, Pa.-based independent natural gas producer Rex Energy have continued the multi-point swings indicative of the last week in trading, market sources said. The 8 7/8% notes due 2020 shaved off more than 6 points to close above 22¾ bid.

Minnetonka, Minn.-based independent oil and gas name Northern Oil and Gas paper had another high volume day, according to a trader. The paper has been heavily traded since the company recently announced a note exchange agreement, a new equity plan, and management changes. The 8% notes due 2020 rose about ¼ point to close above 87¼ bid.

“People are starting to get back into the water,” a trader said. “I think if equity markets hold steady and don’t drop off again then we can get back to normal volume.”

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