RadioShack ends off of day's lows following earnings; Supervalu debt sheds gains; Nokia fades

By Stephanie N. Rotondo

Phoenix, Oct. 23 - There was "general weakness" in the distressed debt market on Tuesday, as concerns about Europe and disappointing earnings pressured the broader market.

However, "it seemed like stuff bounced off their lows," a trader said.

For instance, RadioShack Corp.'s debt fell to levels in the high-50s after reporting its quarterly results. The bonds did eventually come back to close in the low-60s, which was still down 2 to 3 points, according to a trader.

Supervalu Inc.'s recent 10- to 15-point gain came to a halt as well in Tuesday trading. Traders said that part of it was probably due to the overall tone of the market, though most of it was likely due to profit taking.

Elsewhere, Nokia Corp. saw its bonds weaken as the company launched a $980 million sale of convertible debt.

RadioShack stumbles, rebounds

RadioShack reported dismal results for its third quarter. The earnings were not expected to be stellar to begin with, but came in below expectations.

One trader said the 6¾% notes due 2019 responded by falling as low as 573/4, though he added that the paper "rebounded late in the day," leaving the debt at 603/4.

Another trader said the low-tick was 58, with paper going out around 60, down 2 to 3 points from the previous session.

For the third quarter, the Fort Worth-based electronics retailer reported a loss of $47.1 million, or 47 cents per share, due in part to expenses and impairment charges.

Without those charges, the loss would have been 33 cents per share. Analysts had been expecting a loss of just 18 cents per share.

Revenues dipped 3% to $1 billion, a number that also missed expectations of $1.04 billion in revenues.

Same-store sales were down 1.6%. Gross margins were also under pressure, given the company's attempt to move towards a cellular phone destination. Cell phones tend to have lower margins.

Profit takers pressure Supervalu

It was a classic case of "too high, too fast," a trader said of Supervalu's recent run-up and the subsequent reversal that was seen Tuesday.

The trader noted that the bonds spiked to 95 from levels around 80 in just a few days, following the release of the company's quarterly earnings. During its earnings conference call, the Minneapolis-based grocery store operator said that it had received interest from a number of potential buyers. They did not elaborate, but optimism of a pending deal caused investors to scramble for paper.

That all came crashing down Tuesday, as the 8% notes due 2016 "drifted off their highs" to end at 931/2, the trader said.

He also deemed the 8% notes due 2031 down 2½ points at 601/2, while the 7½% notes due 2014 fell a like amount to 83 3/8.

Another market source pegged the 2016 maturity at 93¾ bid, down 1½ points.

At another desk, a trader called the issue down a deuce at 93 bid, 93½ offered.

On Monday, it was rumored that Cerberus Capital Management was in talks with lenders to line up financing of up to $5 billion to buy the company outright. That also helped the debt pack on some value, but a trader opined that it was overdone.

"A week ago these were 83-84," he said. "If something falls apart with this Cerberus buyout offer, these things will go down 10 points."

As such, he speculated that some investors were taking their profits and going home.

Nokia slips on bond sale

Nokia's bonds were slipping as the Finnish cellular telephone maker completed a sale of $980 million of convertible debt.

A trader saw the 5 3/8% notes due 2019 losing nearly half a point to close around 83 3/8.

Another trader said the issue was "pretty active," with the paper ending "a smidge lower" at 83 bid, 83½ offered.

Nokia wrapped the euro-denominated deal on Tuesday and intends to use proceeds to improve its liquidity. Liquidity became an issue last week after the company reported its sixth consecutive quarterly loss. Net cash had fallen a fair bit to €3.6 billion at the end of the latest quarter from €4.2 billion at the end of June and €5.6 billion at the end of 2011.

Nokia has been losing market share to rivals such as Apple and Samsung, as its own line of smartphones have failed to entice consumers.

AMD regains ground

A trader said Advanced Micro Devices Inc.'s bonds "bounced back off their lows" after being on a steady decline since the previous week.

"They bucked the trend," he said of the debt, which ended higher across the board.

The 8 1/8% notes due 2017 closed around 903/4, compared to levels in an 87-88 context the day before, the trader said. The 7¾% notes due 2020 inched up to 82½ bid from 82 bid, 83 offered.

Another trader said the issues "continued to be active," with the 7¾% notes ending unchanged at 82 bid, 83 offered.

The chipmaker's bonds began to decline after the company reported weak earnings last week.

Caesars falls with market

Caesars Entertainment Corp.'s 10% notes due 2018 softened in line with the rest of the market, according to a trader.

He pegged the issue at 64, down half a point.

Another market source called the issue down three-quarters of a point, also at 64 bid.

Caesars is a Las Vegas-based casino operator.

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