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Saturday, 16 December 2017

Teva bonds decline further after firms' downgrades

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Spreads on Teva Pharmaceutical’s bonds continued to be pressured wider for the third consecutive trading day as two more firms downgraded their price targets.

The firm’s shares were also hit, slipping 4.5%.

Morgan Stanley cut its recommendation to underweight from equal-weight, cutting its share price target to US$16 from US$36.

Barclays cut its target price to US$23 from US$38.

Four of Teva’s high-grade bonds were the most actively traded on Monday, according to MarketAxess data.

Its 3.15% 2026s were 8bp wider on the day while 2.80% 2023s were 13bp wider. The widening followed sharper moves last week, with the 3.15% 32bp wider on Friday - a huge move for an investment-grade company’s bonds - following a roughly 20bp widening a day earlier following weaker-than-expected earnings.

Teva, the world’s largest generic drugmaker, said last week earnings were hurt by weaker prices in the US. It cut its interim dividend by 75%, and warned the fall in generic drug prices would accelerate in the second half of 2017 and in 2018.

On Friday, Moody’s and Fitch cut their Teva ratings and gave negative outlooks.

 

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