Safest Play On Mallinckrodt: 6.7% Current Yield, Clear Path To Payment

Markets move fast, and the news flow out of Mallinckrodt (MNK) has been interesting over the last week, to say the least. From last Thursday’s “unfortunate” Latham & Watkins restructuring rumor, to Friday’s opioid settlement news in the state of Ohio, to this week’s BioVectra and Purdue Pharma news, it’s been dramatic. But perhaps the most interesting news for investors is Tuesday’s statement from the company stating that the recent news has opened a “clear pathway” to paying off the 2020 bonds in full, combined with the company’s debt reduction trajectory and free cash flow potential backing up the statement.
This is an “opportunistic” investment, and things change quickly under the opioid cloud, but the 6.7% current yield on Mallinckrodt’s deeply discounted 2020 bonds (trading at 72 cents on the dollar) is attractive and worth considering for a spot in your prudently diversified high return portfolio.
Mallinckrodt Overview:
Mallinckrodt is a specialty pharmaceuticals company that develops, manufactures, markets and distributes both branded and generic specialty pharmaceutical products and medical imaging agents. And as you can see in the price chart below, the company’s 2020 bonds have been under a world of pressure.

(image source: Finra Morningstar, see also cusip L6233LAB2)
Why the Bond Price Has Dropped
The price has dropped for a variety of reasons, including the opioid crisis, Acthar Gel challenges, industry... Read more

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