Endo higher in pharma space; SRC Energy jumps on acquisition news; Dish better

By James McCandless and Paul A. Harris

San Antonio, Aug. 26 – The high-yield secondary market was awash with positive movers in Monday’s session.

Endo International plc’s notes ended better after sector peer Johnson & Johnson Inc. was ordered to pay a multimillion-dollar opioid lawsuit settlement.

In the oil and gas space, SRC Energy’s issues jumped up after news broke of its acquisition.

Elsewhere in the space, declining futures were followed by Chesapeake Energy Corp.’s paper while Whiting Petroleum Corp.’s and Superior Energy Services, Inc.’s notes were divided.

Telecom name Dish Network Corp.’s issues rose after receiving an analyst upgrade early Monday.

Auctioneer Sotheby’s paper was in decline, going against the prevailing trend.

Once again, the high-yield domestic market remained quiet.

Late summer recess

The new issue market remained dormant on Monday and is expected to pass the rest of the pre-Labor Day interval the same way, as numerous market participants use the traditionally quiet Dog Days of late August to take mandatory two-week vacations, sources say.

There is visibility on $20 billion to $25 billion of merger and acquisition related issuance in the post-Labor Day period, syndicate officials continue to say.

Although the period in question runs all the way to the end of 2019, much of the issuance in question could come sooner than later, pending market conditions, a debt capital markets banker said on Monday.

Although a detailed post-Labor Day calendar has yet to take shape, names include Centene Corp. which earlier obtained commitments for a $8.35 billion senior unsecured bridge loan backing Centene's acquisition of WellCare Health Plans Inc., and Zayo Group Holdings Inc. which has a $2,775,000,000 senior unsecured bridge backing the buyout of the company by Digital Colony Partners and the EQT Infrastructure IV fund, sources say.

Away from merger and acquisition business, the early fall is apt to see a decent parade of opportunistic debt refinancing deals, especially given where interest rates are going, the banker said

A lot of issuers will want to take advantage of an opportunity, now taking shape, in which they could conceivably accomplish refinancing by putting in place sub-5% debt, the banker added.

Again, market conditions will be a factor, even though many of the opportunistic issuers in question can hit the market quickly with a morning-to-evening. drive-by deal.

Right now the most prominent force apt to mitigate market conditions in the fall is the ongoing trade war between China and the United States.

As is presently the case, market conditions will likely hinge on whether or not the belligerents appear to be making progress toward an amicable settlement, the source added.

Also, early September could be a busy time in the primary market, the banker said.

Again, given market conditions.

Endo better

Endo’s notes finished the day better, traders said.

The 6% senior notes due 2025 gained 3¾ points to close at 66¾ bid. The Par Pharmaceutical Cos., Inc. 7½% senior secured notes due 2027 rose 1½ points to close at 94½ bid.

The Dublin-based drug maker’s structure shifted upward after news broke of a competitor having to pay hundreds of millions of dollars in an opioid lawsuit.

On Monday, a district court judge in Oklahoma ruled that industry peer Johnson & Johnson would have to pay $572 million in damages to the state for allegedly exacerbating the opioid epidemic in the state.

Johnson & Johnson said it would appeal the ruling.

Last week, Endo announced a $10 million settlement with two counties in Ohio in a similar case.

“It’s a lower number than everyone was thinking,” a trader said. “These settlements look like a case-by-case situation so the sector will probably be just as volatile as it has been in recent months.”

SRC Energy jumps

In oil and gas, SRC Energy’s issues jumped up, market sources said.

The 6¼% senior notes due 2025 shot up 5 points to close at 97¼ bid.

News broke on Monday that competitor PDC Energy has agreed to acquire the Denver-based independent oil and gas producer for $971.3 million in an all-stock deal.

“All of these energy names are looking for ways to increase capital and provide some more value for shareholders,” a trader said. “That leads to deals like this one.”

As part of the deal, SRC shareholders will receive 0.158 PDC shares for each share held.

Oil names divided

As oil futures moved lower, distressed energy tranches saw differing movements, traders said.

West Texas Intermediate crude oil futures for October delivery lost 53 cents to settle Monday at $53.64 per barrel.

North Sea Brent crude oil futures for October delivery ended at $58.70 per barrel after a 64-cent loss.

Oklahoma City, Okla.-based independent oil and gas producer Chesapeake Energy’s paper gained.

The 8% senior paper due 2025 picked up 1 point to close at 76 bid. The 8% senior paper due 2026 rose 1¾ points to close at 71¼ bid.

Denver-based producer Whiting’s notes saw differing movements.

The 6¼% senior notes due 2023 gained 1¼ points to close at 80¼ bid. The 6 5/8% senior notes due 2026 shaved off ½ point to close at 74½ bid.

Houston-based oilfield services provider Superior Energy’s issues were also mixed.

The 7 1/8% senior notes due 2021 dropped 2¾ points to close at 70 bid. The 7¾% senior notes due 2024 improved by 1¾ points to close at 63¾ bid.

Dish rises

In telecom, Dish’s paper was on the rise on Monday, market sources said.

The 5 7/8% senior notes due 2024 tacked on ½ point to close at 94 bid.

Early Monday, analysts at Raymond James issued an upgrade for the Englewood, Colo.-based pay-TV provider.

The company was upgraded to strong buy from market perform, citing the company’s potential to build out a 5G network.

Recently, to help facilitate a merger between mobile phone giants Sprint and T-Mobile, Dish agreed to acquire $5 billion in wireless assets to settle antitrust inquiries.

Sotheby’s declines

Sotheby’s notes ended the day worse, going against the trend, traders said.

The 4 7/8% senior notes due 2025 dipped ½ point to close at 102½ bid.

On Saturday, news broke that a shareholder advisory firm told the New York City-based auction house’s investors to support French billionaire Patrick Drahi’s $2.7 billion takeover bid.

Indexes better

Three high-yield indexes all saw improvements at the start of the week.

The KDP High Yield Daily index ended Monday up by 2 basis points to 71.53 with the yield now at 5.50%.

The index gained 3 bps on Friday, 17 bps on Thursday and added 11 bps on Wednesday.

The ICE BofAML US High Yield index edged up 6.6 bps on Monday with the year-to-date return now at 10.642%.

The index lost 9.9 bps on Friday, gained 13.7 bps on Thursday and garnered 31.3 bps on Wednesday.

The index has now spent a full week above the 10% threshold.

The CDX High Yield 30 index improved by 35.41 bps, finishing the session at 106.1015.

The index rose by 36.2 bps on Friday, gained 34.44 bps on Thursday and climbed up 34.55 bps on Wednesday

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