Mallinckrodt notes up on hope of settlement; Party City active as ratings downgraded

By James McCandless

San Antonio, Nov. 25 – The distressed debt market began a truncated week with a focus on news in the pharma and retail sectors.

Mallinckrodt plc’s notes traded up after news broke of a potential settlement between the government and generic producers over alleged price fixing.

Meanwhile, in retail, Party City Holdco Inc.’s issues varied in direction as it received a ratings downgrade.

Sector peer L Brands, Inc.’s paper also diverged, taking a downgrade after its latest earnings report.

In the telecom space, Intelsat SA’s notes fell as the company and the Federal Communications Commission spar over C-band spectrum auction terms.

Wireline communicator Frontier Communications Corp.’s issues moved in different directions.

Real estate startup WeWork Cos. Inc.’s paper bounced off of recent lows.

Oil futures rose on positive trade comments, reflecting gains for Whiting Petroleum Corp.’s and Valaris plc’s notes while Chesapeake Energy Corp.’s issues were mixed.

Mallinckrodt up

Mallinckrodt’s notes were seen moving upward on Monday, traders said.

The 5¾% senior notes due 2025 jumped up 4¼ points to close at 31 bid. The 5½% senior notes due 2025 gained 4 points to close at 27 bid.

The Staines-upon-Thames, England-based generic drug producer’s structure saw positivity after news broke that a group of generic drug makers are expecting to reach a settlement with the Department of Justice over alleged price fixing in the generics market.

In May, the government named 20 manufacturers in an anti-trust complaint that alleges that price coordination had taken place in the pricing of 100 generic drugs.

“This would be overall good news by itself,” a trader said. “There is still the opioid stuff to settle.”

The company is still facing myriad lawsuits over its role in the opioid epidemic that it hopes to solve through a blanket settlement.

Party City mixed

Meanwhile, in retail, Party City’s issues varied, market sources said.

The 6 1/8% senior notes due 2023 rose ¾ point to close at 76¾ bid. The 6 5/8% senior notes due 2026 shaved off ¾ point to close at 60¼ bid.

During the Monday session, Moody’s Investors Service issued a downgrade for the Elmsford, N.Y.-based retailer.

The agency lowered the company’s corporate family rating, probability of default rating and issue-level ratings, citing weaker-than-expected operating results for the third quarter.

For a weak quarter, the company blamed low Halloween sales, increased freight costs and a helium shortage.

L Brands diverges

Meanwhile, L Brands’ paper also saw a divergence, traders said.

The 6¾% senior notes due 2036 rose 1¾ points to close at 87¼ bid. The 6 7/8% senior paper due 2035 dipped 1¼ points to close at 87½ bid.

The Columbus, Ohio-based department store name was another in the retail space to receive a downgrade on Monday.

S&P Global Ratings lowered the company’s rating to BB- from BB, also cutting its other ratings by one degree.

The agency’s move was focused on the poor performance from the Victoria’s Secret segment, which reported an 8% drop in sales.

An activist investor continues to pressure the company to make corrective measures, including spinning off underperforming brands.

Intelsat falls

In the telecom space, Intelsat’s notes were lower, market sources said.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 fell 1¾ points to close at 48¼ bid. The 9½% senior notes due 2023 dived 3¾ points to close at 59½ bid.

As the Luxembourg-based satellite operator and its cohorts in the C-Band Alliance look for ways to soften the blow of the FCC committing to a public auction for C-band spectrum, an FCC commissioner said on Monday that its plan will benefit those that were pushing for a private alternative.

FCC commissioner Jessica Rosenworcel said that “an incentive that makes them return the maximum amount of airwaves” will likely be part of any auction.

The consortium of satellite names originally pushed for a private auction.

Norwalk, Conn.-based wireline name Frontier’s issues moved in different directions.

The 10½% senior notes due 2022 picked up ½ point to close at 46 bid. The 11% senior notes due 2025 shaved off ¼ point to close at 45½ bid.

WeWork rises

Coworking name WeWork’s paper bounced off of recent lows, traders said.

The 7 7/8% senior notes due 2025 added 2 points to close at 73 bid.

Last week, the New York-based real estate startup implemented a major portion of its cost-cutting plans, laying off 2,400 from its total workforce.

The move represents a reduction of almost 20% of its staff.

Oil names better

As oil futures rose on positive trade comments, distressed energy names tracked higher, market sources said.

As government officials in China and the United States said that it’s likely that a trade deal could be reached soon, oil futures were positive.

West Texas Intermediate crude oil futures for January delivery gained 24 cents to settle at 58.01 per barrel.

North Sea Brent crude oil futures for January delivery finished at $63.65 per barrel after a 26 cent add-on.

Denver-based independent oil and gas producer Whiting’s notes followed futures higher.

The 6¼% senior notes due 2025 garnered 1 point to close at 69½ bid. The 6 5/8% senior notes due 2026 inched up ¼ point to close at 58 bid.

London-based contract driller Valaris’ issues followed the sector trend.

The 5.2% senior notes due 2025 improved ½ point to close at 46 bid. The 7¾% senior notes due 2026 added ¼ point to close at 45¾ bid.

Oklahoma City-based producer Chesapeake Energy’s paper was mixed.

The 8% senior notes due 2025 picked up ½ point to close at 53½ bid. The 8% senior notes due 2027 slid ¼ point to close at 50¾ bid.

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