Seadrill loan rises on restructuring proposal; Mallinckrodt debt climbs on Chapter 11 filing – Mid-Day Commentary

Seadrill’s loan ticked up today after the offshore drilling company released cleansing materials related to its restructuring process earlier today. The materials outline the latest outcome of negotiations between the company and new secured noteholders. 

Both the secured holders and the company have agreed that the new secured noteholders will be ringfenced from the current RigCo/IHCo structure with Seadrill retaining 100% of the equity and NSN holders to receive takeback paper. 

Also notable, the company’s latest proposal states that no cash will be funded into the NSNCo by the reorganized company. 

The Debtwire legal analyst team pointed out in a report in June that the company would be wise to protect contract backlog and preserve cash in a restructuring, similar to its counterpart Diamond Offshore Drilling

The USD 1.8bn Libor+ 600bps term loan due 2021 is quoted today in the 11.571/14.571 context, up from quotes yesterday at 10.6/13.6 and 9.625/12.625 on Friday, according to Markit. 

Mallinckrodt’s debt continued to climb after the pharma company filed for bankruptcy protection yesterday (12 October) with a restructuring support agreement backed by holders of 84% of its unsecured notes, 50 states and territories, and a plaintiffs’ executive committee representing the interests of thousands of plaintiffs in the opioid multidistrict litigation pending in the Northern District of Ohio.

As per the agreement, its USD 3.7bn in secured debt will get reinstated, while holders of around USD 1.66bn in unsecured notes would receive USD 375m in new seven-year second lien notes and 100% of the reorganized equity. Initial talks on the RSA framework were reported by Debtwire last month.

The plan also includes USD 1.6bn of payments over seven years and warrants for 19.99% of its equity as part of the opioid settlement, as well as an additional USD 260m payment over seven years to settle litigation related to its Acthar drug.

The company’s USD 610m 5.75% unsecured notes due 2022 shot up to 40 today compared to 37 yesterday and 23.5 on 18 September, prior to the bankruptcy filing, according to MarketAxess. Meanwhile its roughly USD 323m 10% secured notes due 2025 traded at 89.5 yielding 13.166% this morning from 77 on 9 October, according to MarketAxess.

Its USD 1.5bn Libor+ 275bps TLB due 2024 is quoted in the 89/90.25 context today, up from 86.875/88.25 yesterday and 83.050/84.675 on 9 October, according to Markit. 

Royal Caribbean common shares are down 10% to USD 62.43 from yesterday’s close of USD 69.83 after the company said it would issue USD 500m in common stock and USD 500m in senior convertible notes due 2023. 

While the equity markets price in future dilution, the credit markets were encouraged by the company’s continuing ability to raise capital and pay down maturing debt. Proceeds from the convertible notes will retire portions of the USD 300m 2.65% unsecured notes due 28 November 2020, according to the press release. 

The unsecured notes due in November did not trade this morning, but pricing firmed on its USD 650m 5.25% unsecured note due 2022 to 89 to yield 9.6% from an October low of 86.75 yielding 10% on 2 October. Meanwhile, its USD 300m 7.5% unsecured notes due 2027 also traded up to 91.125 to yield 10% from 89.75 to yield 10.8% on 2 October.

Royal Caribbean also announced an update to its operations this morning—including total liquidity of USD 3.7bn and a monthly cash burn of USD 250-USD 290m. That cash burn does not include retirement of USD 1.3bn in debt maturities in 2021, according to the company’s disclosure.

2020 Debtwire

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