Claire's CEO exits, bonds drop; coal names get boost; Forest Oil drifts lower; Momentive mixed

By Stephanie N. Rotondo

Phoenix, April 2 - It was a mixed day for distressed debt on Wednesday.

Claire's Stores Inc. was "getting hit pretty good" after the company reported earnings and said its chief executive officer was leaving.

The company did not give a reason for the CEO's exit.

The coal sector, meanwhile, was steadying after BHP Billiton's management said that it expected demand for the commodity to climb over the next two decades.

Due to current oversupply, however, prices are expected to remain depressed.

In other commodities, Forest Oil Corp.'s debt was weaker on the day as investors reacted to news of a credit facility amendment.

Perhaps setting the mixed trend was Momentive Performance Materials Inc. Late Tuesday, the chemical and polymer manufacturer said in a regulatory filing that it had to delay filing its most recent 10-K, as management needed more time to analyze its financial statements.

Momentive also said it was in talks with stakeholders "regarding alternatives to modify its capital structure and reduce the company's leverage."

Claire's hit on CEO exit

Claire's Stores announced Tuesday that James Fielding, CEO, was leaving the position he had held since mid-2012.

The company also reported a narrower net income for its fiscal fourth quarter.

A trader said the 8 7/8% notes due 2019 were the day's "big loser," falling to a low of 83 versus the previous day's levels around 94.

He noted that the paper had begun trading down on Tuesday.

Another trader said the name was "way down early," seeing the 8 7/8% notes hitting a low around 83, though they eventually settled back in around 88.

For the quarter ended Feb. 1, the Hoffman Estates, Ill.-based jewelry retailer posted net income of $7.4 million versus income of $42.2 million the previous year.

Revenues took an 11.7% hit, falling to $435.5 million. Same-store sales declined 10.7%.

The company said it was shuttering its Chinese operations, including all stores.

Fielding's exit was effective immediately. Beatrice Lafon, president of Claire's Europe, will take over the helm.

Coal firms up

A trader said that "all coals kind of steadied" on comments indicating that "demand could be better outside of China."

The trader saw Arch Coal Inc.'s 7¼% notes due 2019 held at 78 while the 7% notes due 2019 rose 1¼ points to 793/4.

Alpha Natural Resources Inc. meantime "rebounded," the trader said, seeing the 6¼% notes due 2019 at 761/2.

"That's up 1½ points or so from the lows last week," he said.

Another market source pegged Alpha Natural's 6¼% notes at 76¾ bid, up half a point.

Walter Energy Inc.'s 9 7/8% notes due 2020 won the sector's big gainer award, rising over 3 points to end around 693/4.

"Coal bonds were up a bit," said another trader. He said Walter's 9 7/8% notes were "up a couple points," trading around 70.

He added that "Arch and Alpha bonds [were] both up about half a point."

At a meeting of The Committee for Economic Development of Australia in Brisbane, BHP Billiton's CEO Dalla Valle said he was expecting demand for coal - specifically metallurgical coal - to increase over the next 20 years, especially from India.

However, due to current oversupply, he speculated that prices would remain depressed.

Forest Oil slips

Elsewhere in commodities, Forest Oil's 7½% notes due 2020 slipped half a point to 87½ and the 7¼% notes due 2019 dipped a quarter-point to 821/2, according to a trader.

On Tuesday, the Denver-based oil and gas company said it had secured an amendment from its lenders in exchange for cutting its borrowing ability by $300 million.

Though the company now has fewer dollars to borrow, the company needed the amendment - an agreement to allow the company to increase its debt relative to cash flow - as it was expecting to breach a cash burn covenant.

Momentive mixed

Momentive Performance bonds were mixed during midweek trading following a late Tuesday regulatory filing in which the company said it was engaged in restructuring talks with stakeholders.

One trader saw the 11½% notes due 2016 at 303/4, off over 2 points. The 8 7/8% notes due 2020 were steady at 109, but the 9% notes due 2021 rose almost half a point to 80 3/8.

Another trader pegged the 11½% notes around 31 and the 9% notes in a 79 to 80 context.

The Waterford, N.Y.-based company said in the filing that it was delaying filing its 10-K to allow more time to analyze the financial statements. It noted that it expected auditors to issue a "going concern" warning given the potential of breaching covenants. As such, it had begun talking to stakeholders in the hopes of coming to some agreement. The company indicated that a bankruptcy filing might be the easiest way to complete such an endeavor.

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