Mallinckrodt pushed lower; Beazer Homes better; PG&E gains; Whiting varies

By James McCandless and Paul A. Harris

San Antonio, Aug. 29 – The high-yield secondary saw a positive shift on Thursday, with high-profile movements in pharma and energy.

Mallinckrodt plc’s notes dropped throughout the day after a subsidiary drew down the remaining balance of its revolving credit facility.

In construction, Beazer Homes USA, Inc.’s issues moved up as the company announced a redemption of its senior notes

Meanwhile, utilities name PG&E Corp.’s paper shifted upward.

Elsewhere, in energy, Whiting Petroleum Corp.’s notes varied as the company announces a tender offer for its convertible securities.

Oil futures rose, followed by Chesapeake Energy Corp.’s issues while California Resources Corp.’s and Superior Energy Services, Inc.’s paper went against the grain.

The primary market is still looking to the Sept. 3 week.

Funds saw $689 million of inflows and high-yield indexes continued to move higher.

Funds see $689 million inflows

The high-yield primary market remained quiet on Thursday.

The new issue bourse is not expected to reactivate until market participants retake their desks on Tuesday, Sept. 3, when the coming Labor Day holiday weekend in the United States will be concluded.

In news bearing upon the technical forces of the market, the dedicated high-yield bond funds saw $689 million of new inflows in the week to Wednesday's close, according to information posted on the internet by Lipper US Fund Flows, on Thursday.

It follows the previous week's $1.5 billion of net outflows.

There have been 24 weeks of inflows and 10 weeks of outflows in the 34 weeks of 2019, according to a Prospect News analysis of the data.

The latest weekly inflow supports the perception that the technicals of the high-yield bond market are currently strong.

There is cash to put to work in high yield, market sources in both Europe and the United States say.

The opportunity to put that cash to work should present itself in the post-Labor Day period, during which $20 billion to $25 billion of merger and acquisition related financing is expected to hit the market in the run-up to 2020, according to sources.

There is also a pipeline of opportunistic debt refinancing deals, some of which were temporarily sidelined by late summer market turbulence related to the ongoing trade war between China and the United States, they add.

That post-Labor Day period is expected to get underway with an active September primary market which should not take long to get up and running.

The holiday-abbreviated first week of September should be an active one, sources say.

Mallinckrodt drops

Mallinckrodt’s notes dropped in Thursday’s session, traders said.

The 4¾% senior notes due 2023 crashed 9¾ points to close at 39 bid. The 4 7/8% senior notes due 2020 shed 8¼ points to close at 79¾ bid.

Late Wednesday, a subsidiary of the Staines-upon-Thames, England-based pharmaceuticals maker drew down the remaining $95 million of the liquidity available on its revolving credit facility.

The company said that the increased liquidity puts it on better footing to “address cash needs that may arise in the future,” Prospect News reported.

“There’s just so much dragging all of these names down,” a trader said. “Mallinckrodt’s pushed itself into a corner.”

The name, as well as its industry, has come under increased scrutiny as legal challenges over the opioid epidemic permeate the space.

This week, news broke that competitor Purdue Pharmaceuticals was in talks to settle all litigation against it for a combined $12 billion while Johnson & Johnson was ordered to pay Oklahoma $572 million.

Beazer up

Builder Beazer Homes’ issues moved higher, traders said.

The 7¼% senior notes due 2023 added ¼ point to close at 100¼ bid. The 5 7/8% senior notes due 2027 garnered 1¼ points to close at 98½ bid.

On Thursday, the Atlanta-based residential construction company announced that it would redeem all $23.6 million of its outstanding 7¼% senior paper on Sept. 30.

The company will redeem the notes at 102.417 plus accrued interest to the redemption date, Prospect News reported.

PG&E better

Utilities name PG&E’s paper moved up on heavy trading, market sources said.

The 6.05% paper due 2034, considered the company’s flagship tranche, rose ¼ point to close at 109½ bid.

The San Francisco-based bankrupt electric utility’s structure has seen a run of negativity in the last few weeks after a bankruptcy judge ruled that wildfire victim claims against the company could proceed in court, exposing the name to an additional $18 billion in liabilities.

Next month, the company will submit its restructuring plan after having won the sole right to do so following challenges from creditors.

Whiting varies

Elsewhere, in energy, Whiting Petroleum’s notes saw varied movements, market sources said.

The 6¼% senior notes due 2023, while pushing up to 79 bid during the day, ended unchanged at 78½ bid. The 6 5/8% senior notes due 2026 shaved off ¼ point to close at 75½ bid.

The Denver-based independent oil and gas producer announced on Thursday that it has started a tender offer to purchase up to $300 million of its $562,075,000 outstanding 1.25% convertible senior notes due 2020.

The company is offering to pay a cash amount equal to $990 per $1,000 principal amount of notes purchased, Prospect News reported.

After its most recent earnings report, the name’s structure was pushed further into distressed territory after posting weak numbers and laying off 33% of its workforce.

Oil futures rise

As oil futures gained, distressed energy tranches saw differing results, traders said.

West Texas Intermediate crude oil futures for October delivery improved by 93 cents to settle at $56.71 per barrel.

North Sea Brent crude oil futures for October delivery finished at $61.08 per barrel after gaining 59 cents.

Oklahoma City, Okla.-based producer Chesapeake Energy’s issues moved up.

The 8% senior notes due 2025 tacked on ¾ point to close at 77 bid. The 8% senior notes due 2026 gained 1¼ points to close at 72 bid.

Los Angeles-based peer California Resources’ paper went against the prevailing trend.

The 8% senior paper due 2022 slid ½ point to close at 57½ bid.

Houston-based oilfield services provider Superior Energy’s notes fell.

The 7 1/8% senior notes due 2021 lopped off 2¼ points to close at 70 bid. The 7¾% senior notes due 2024 lost ¼ point to close at 63¼ bid.

Indexes positive

Three high-yield indexes continued to maintain positive tracks on Thursday.

The KDP High Yield Daily index moved up 11 basis points on Thursday to close at 71.76 with the yield lowering to 5.40%.

The index picked up 5 basis points on Wednesday, gained by 7 bps on Tuesday and rose 2 bps on Monday.

The ICE BofAML US High Yield index gained 17.4 bps on Thursday with the year-to-date return now at 11.098%.

The index improved by 10.9 bps on Wednesday, tacked on 12 bps on Tuesday and edged up 6.6 bps on Monday.

The CDX High Yield 30 index shot up 34.04 bps, closing the day at 106.6984.

The index rose 34.84 bps on Wednesday, garnered 36.63 bps on Tuesday and improved by 35.41 bps on Monday.

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