Mallinckrodt shares weaken on bankruptcy consideration; Spirit AeroSystems bonds fall on disappointing 2Q20; Fieldwood ticks up on Chapter 11 – Mid-Day Commentary

Mallinckrodt’s stock plunged this morning after the pharmaceutical company noted in its 2Q20 earnings release that it is considering a bankruptcy filing for the parent company in the face of its legal and financial challenges. 

The announcement follows the recent Debtwire report highlighting investor expectations for a potential bankruptcy of Mallinckrodt Plc rather than just the specialty generics related subsidiaries that the company had outlined earlier this year as part of a global opioid settlement framework.  

Meanwhile, the composition of the borrower’s bondholder group changed recently following a sizeable block trade with Franklin Advisors as the likely seller and certain loan-to-own and distressed funds as one of the buyers. 

For 2Q20, Mallinckrodt reported a 79.7% drop in net sales to USD 166.5m for 2Q20 compared to USD 823.3m for the same period last year. However, adjusted net sales, which include the adjustment for the one-time Acthar Gel Medicaid rebate liability, amounted to USD 700.9m.  

Mallinckrodt’s USD 610m 5.75% unsecured notes due 2022 changed hands at 19 this morning, up from 17.438 yesterday, according to MarketAxess. Common shares fell 23.89% from yesterday’s close to trade at USD 1.72 with a USD 144.8m market cap. 

Spirit AeroSystems’ capital structure traded off after the airplane parts maker posted disappointing results for 2Q20 revenue and a greater-than-expected earnings per share loss.  

The Boeing supplier disclosed an adjusted loss of USD 2.28 per share, compared to consensus estimates of USD 1.19 per share. Revenue came in at USD 644.6m for the quarter, falling short of expectations of USD 806.3m.  

Spirit announced further layoffs in its commercial programs on Friday, along with a 737 Max production rate cut. Consequently, the company disclosed yesterday that it has amended financial covenants ahead of an expected violation this year. 

The USD 700m 4.6% senior unsecured notes due 2028 traded down to 74.5 to yield 9.233% today from trades at 77.5 to yield 8.594% yesterday (3 August). The USD 1.2bn 7.5% senior secured notes due 2025 traded down to 96 to yield 8.548% from trades at 97.125 to yield 8.246% yesterday, according to MarketAxess.  

Spirit’s stock initially fell 6.4% today to USD 18.25 per share before recovering slightly to trade today at USD 18.80 per share and a market cap of USD 1.98bn, down 3.54% from yesterday’s close.  

Fieldwood Energy’s first lien loan edged up after the company filed for Chapter 11 today. The E&P disclosed that it has an RSA and has secured a DIP loan of up to USD 100m.  

The filing follows Debtwire reports that the company had been fielding pitches on a workout plan amid short reprieves from its lender groups. Fieldwood entered into forbearance agreements with certain lenders after skipping coupon payments due on its first and second lien term loans, as reported.  

The USD 1.14bn Libor+ 525bps first lien exit loan due 2022 is quoted in the 24.375/27.875 context today, up from 23.5/27.3 yesterday (3 August), according to Markit.  

Royal Caribbean‘s notes firmed up following the disclosure that the company amended covenants in its USD 4.5bn unsecured credit facilities. The amendments waive a quarterly fixed charge coverage ratio while increasing the monthly minimum liquidity covenant through 4Q21. 

The USD 1.15bn 4.25% senior secured notes due 2023 traded today at 96.453 to yield 5.608% from trades at 93.67 to yield 6.715% yesterday. The USD 500m 3.7% senior unsecured notes due 2028 firmed up to 71.055 to yield 9.043% from recent trades in the 70.5 context, according to MarketAxess.  

The company’s stock rose 4.25% to USD 49.40 and a market cap of USD 10.6bn.  

In new issues, Service Corp’s new USD 850m 3.375% senior unsecured notes due 2030 traded up today on heavy volume today following the drive-by issuance yesterday, MarketAxess.  

The bonds broke for trading today at par and rose to 101.25 to yield 3.1% on over USD 250m in volume.  

Proceeds from the BofA-led issue will pay for a tender of the company’s USD 850m 5.375% senior notes due 2024. 

Nationstar Mortgage’s USD 850m 5.5% senior unsecured notes due 2028 traded up to 101.25 for a 5.214% yield after pricing at par yesterday, according to MarketAxess. Proceeds from the financing will be used to pay down debt.   

Sensata’s newly issued USD 750m 3.75% senior unsecured notes due 2031 changed hands at 101.313 yielding 3.549% this morning after pricing at par yesterday.  

The financing is slated to repay revolver borrowings, fund general corporate purposes and potentially redeem some or all of the company’s 6.25% notes due 2026 at their first call date in early 2021. 

2020 Debtwire

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