Distressed pharmaceutical paper mixed; Endo secureds lower; Mallinckrodt up; Telesat off

By Cristal Cody

Tupelo, Miss., April 20 – Distressed pharmaceutical paper saw a mixed reception in the secondary market a day after Alabama announced a $276 million opioid-related settlement with three companies.

Endo International plc’s secured notes remained soft after the drug manufacturer reached the deal with the state.

Alabama also has claims moving through bankruptcy court for other drug manufacturers, including Mallinckrodt plc.

Mallinckrodt’s notes rallied about 1¾ points to over 7 points on Wednesday from the start of the week.

Distressed secondary action was quieter on Wednesday with trading seen more in higher-rated Ba1 and B2 junk issues, according to a market source.

Telesat Corp.’s 6½% senior notes due 2027 (Caa2/CCC+) fell 1 point in light activity.

Market tone was mixed with the Nasdaq off 1.22% and oil mostly unchanged.

The iShares iBoxx High Yield Corporate Bond ETF traded 25 cents higher at $80.29 by the close.

May and June oil prices were little changed after declining over $5 on Tuesday.

West Texas Intermediate crude oil benchmark futures for May delivery rose 19 cents to settle at $102.75 a barrel.

In other distressed action on Wednesday, Fitch Ratings reported that restructurings and distressed debt exchanges “are becoming more commonplace in the loan market as evidenced by the 32% and 22% share tallied in 2019 and 2020, respectively.”

Year-to-date default volume remains low at $5.2 billion, according to the report.

Sungard Availability Services marks the first bankruptcy since early December.

“Bankruptcies comprise just 36% of the TTM default volume versus out-of-court restructurings at 60%,” Fitch said.

Endo notes mixed

Endo Finance LLC’s 9½% senior secured notes due 2027 (Caa2/CCC+) fell nearly 1¼ points to a print of 82.32 by late afternoon on $8 million of paper trading, a source said.

The notes were down 2¼ points to 83½ bid on $7 million of volume on Tuesday.

Meanwhile, Endo’s 6% senior notes due 2028 (Caa3/CCC-) rose about ¾ point on Wednesday to 51 bid in steady activity through the afternoon.

Alabama announced on Tuesday that Endo agreed to pay $25 million as part of a $276 million settlement the state reached with Endo, Johnson & Johnson and McKesson Corp. over opioid-related claims.

Endo’s opioid-related settlements include a $65 million settlement with Florida announced in January.

In 2021, the Dublin-based pharmaceuticals maker company reported a $35 million settlement in Tennessee, a $7.5 million settlement in Louisiana and a $50 million agreement to settle three opioid-related cases in New York.

Mallinckrodt notes rally

Mallinckrodt’s 5 5/8% notes due 2023, last active Monday down 5 points at 45 bid, rallied to 52½ bid in a handful of trades on Wednesday, according to a market source.

The company’s 5½% senior notes due 2025 also attracted interest and rose to 52¼ bid, up 1¾ points from where the paper last moved on Monday.

The Dublin- and St. Louis-based pharmaceutical company reported last week that it plans to obtain a $900 million first-lien secured term loan and a $200 million accounts-receivable-backed revolving credit facility.

Telesat notes soften

The satellite communications space was soft with Telesat Canada LLC’s 6½% senior notes due 2027 (Caa2/CCC+) down 1 point to 46½ bid, a source said.

Trading was light with $2 million of volume.

Telesat’s notes had climbed past 51 bid in March after the company reported weak revenue and profit in 2021 and the fourth quarter.

The Ottawa-based satellite communications company was downgraded by Moody’s Investors Service on April 6, and S&P lowered the company’s ratings on March 30.

Telesat Canada and Loral Space & Communications Inc. completed a merger in November with the combined company listed on the Nasdaq and Toronto Stock Exchange under the ticker “TSAT.”

Distressed index flat

The S&P U.S. High Yield Corporate Distressed Bond index one-day total return softened to zero on Tuesday from 0.44% on Monday.

Month-to-date total returns were flat at minus 1.37%.

Year-to-date index returns also were unchanged on Tuesday at minus 6.61%.

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