Claire's Stores notes slip on numbers; Tropicana structure mixed; Dura bonds in death spiral

By Stephanie N. Rotondo

Portland, Ore., Dec. 14 - While New York was not pelted with as much snow as was forecasted, that did not stop investors and other players from all but backing away from the market entirely Friday.

Nothing's happening," a trader said. "It's real slow."

With just a week to go before the Christmas/New Year holiday, activity in the distressed market has practically ground to a halt. Along with the upcoming merriment, market sources have also blamed an uncertain marketplace for the slowdown.

But for those who were at their desks, it was Claire's Stores Inc. that grabbed their attention. The value-priced jewelry chain released its third-quarter results, and the company's bonds - as well as its term loan - got beat up. Traders said the corporate debt fell as much as 8 points during trading.

Meanwhile, Tropicana Entertainment LLC, also known as Wimar Operating, was not as active as it had been in the previous session, when the bonds took a ride as the casino operator's license renewal was denied. The bonds closed essentially unchanged.

Dura Automotive Systems Inc.'s debt continued to slide just one day after the company said it had to postpone its bankruptcy exit. One trader also speculated that Pacificor LLC, which has agreed to backstop the company's rights offering, might back out of the deal.

Claire's slips on numbers

Claire's Stores' bonds got "beat up," a trader said, after the company released its third-quarter numbers.

The trader said the subordinated notes - the 10½% notes due 2017 - fell 7 to 8 points on the disappointing figures, trading around 54 bid, 55 offered in the afternoon. The 9¼% notes due 2015 were also down, but just 2 to 3 points at 71 bid, 72 offered from 74 bid, 75 offered.

At another desk, a trader said he saw the notes "offered lower," the 10½% notes at 53 bid, 55 offered.

"I think that's a new low for that bond," the trader opined. Given that the piece was issued earlier this year, the trader added, "That's another one that's not doing so well."

Another trader said the company's notes were "the only thing moving fast today." He added that he heard the company's conference call was "not pretty."

The trader quoted the 10½% notes at 54 bid, 55 offered, down from 60 bid, 62 offered in the previous session. He said the bonds came back "a touch off the low" of 52 bid, 54 offered.

"They were down 8 and came back up to down 6," he said.

He also saw the 9¼% notes at 69 bid, 70 offered and the 9 5/8% notes due 2015 at 65 bid, 67 offered.

"Everything got smacked down," he said.

The Pembroke Pines, Fla.-based retailer's term loan B was also deemed weaker in Friday trading.

Early on in the day, the term loan B was trading in the 85 context and then, after the company held its conference call to discuss the financial results, the loan traded as low as 831/2, a trader said.

However, some better buyers started to step in at the lower levels, pushing the paper up to the 84½ bid, 85 offered context by late afternoon, the trader remarked.

Despite the slight rebound, levels on the term loan B still ended the session lower on a day-over-day basis as the paper had closed on Thursday at 86 bid, 87 offered, the trader added.

For the third quarter, the company reported net sales of $357.4 million, a 2.8% increase over the third quarter of fiscal 2007. The increase was primarily attributable to the growth in the company's new store base, particularly in Europe, and foreign currency translation gains, offset by a slight decrease in same-store sales.

Third-quarter consolidated same-store sales declined 0.7%. In North America, same-store sales decreased 1% versus last year's third fiscal quarter, while European same-store sales were essentially flat with last year's third fiscal quarter, at negative 0.1%.

Also in the quarter, adjusted EBITDA was $60.5 million compared to $68.5 million last year, cash provided by operating activities was $24.4 million, compared with $56.6 million last year, and capital expenditures were $23.8 million versus $30.1 million last year.

For the first nine months of fiscal 2008, net sales were $1.0635 billion, up 5.4% from $1.0087 billion in the comparable period last year.

First nine months of fiscal 2008 consolidated same-store sales decreased 0.4%.

And, adjusted EBITDA during the nine-month period was $185.5 million compared to $196.6 million in the first nine months of fiscal 2007.

Tropicana/Wimar structure mixed

After taking a ride Thursday, Tropicana Entertainment's bonds quieted down, traders reported.

A trader said the casino operator's 9 5/8% notes due 2014 were "not as active" as they had been in the previous session, trading at 64.5 bid, 65.5 offered, which he called "unchanged for the most part."

Another trader said he saw the debt "stabilizing," at 65 bid, 66 offered. He called that up from the previous day's lows, adding that activity was "nothing like yesterday."

Following the trend from Thursday, the company's first-lien term loan was better bid during the session, attributed to follow through from news of a potential repayment, a trader said.

The first-lien term loan ended the day at 97½ bid, 98 offered, up on the bid side from 97 bid, the trader said. The offer was unchanged.

Early Thursday, Tropicana, better known in the market as Wimar, announced that the New Jersey Casino Control Commission had denied the gaming license renewal application at its Tropicana Casino and Resort in Atlantic City. Further, the commission ordered that the property be transferred immediately to a trustee until a sale can be arranged.

The news prompted the bonds to dive but was better for the term loan, as proceeds from any sale will likely be used to repay debt under the company's credit facility.

The trustee has 120 days of the transfer of the property to sell the Atlantic City property. However, the commission could extend this period.

The company also said that it plans to appeal the commission's determination through the New Jersey appellate court system. If the appeal is unsuccessful by Dec. 19, the company will be in default under its credit facility, and if lenders accelerate the bank debt, then a default under the company's senior subordinated notes and Las Vegas term loan will also occur. While the company continues to work with its lenders to avoid an acceleration, it could be forced to seek alternatives - including bankruptcy - if a deal cannot be reached.

Elsewhere in the sector, Trump Entertainment Resorts Inc.'s 8½% notes due 2015 traded at 77.5 bid, 78 offered, "nothing really notable," a trader said.

When asked why gaming names had become so popular, the trader speculated that the many billion-dollar issues "got a little hair on them," making them a "point of interest" for some investors.

Dura in death spiral

It might be time to hit the emergency brake for Dura Automotive, as its senior bonds have entered into a death spiral.

The automotive parts supplier announced Thursday that it would need to delay its bankruptcy exit due to difficulty lining up its exit financing. The bonds - which had already started to tumble on news earlier in the week that it had asked the bankruptcy court to delay its confirmation hearing - started to slide more rapidly.

Friday was no different.

A trader said the 8 5/8% senior notes due 2012 were "knocked around a little," trading at 12 bid, 13 offered. Another trader quoted the bonds at 12 bid, 14 offered, adding that the issue traded as low as 11.

"It's certainly a mess," the first trader said.

The Rochester Hills, Mich.-based company had been planning on exiting Chapter 11 by the end of the year. As it has now put off its emergence indefinitely - though it is hoping early next year - Pacificor LLC, which has agreed to backstop the company's $140 million to $160 million rights offering, could back away from the deal.

When asked if he thought the private equity firm would walk away, the trader said, "I would think so. The market is certainly acting that way."

But should that happen, he said, it was unclear who would then swoop in to save the day.

Another trader agreed that it was likely Pacificor would terminate the deal, saying "business is terrible."

Still, a buysider said that while Dura and Delphi Corp. were "almost back to the drawing board," he expected the companies will eventually find their financing.

Speaking of Delphi, a trader said the Troy, Mich.-based company's bonds were "a little lower," its 6.55% notes that were to have come due last year and its 6½% notes due 2009 at 64 bid, 65 offered.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.