Arch Coal rises, details on new deal emerge; Gymboree earnings disappoint; Logan's debt weaker

By Stephanie N. Rotondo

Phoenix, Dec. 12 - Despite a generally weak tone to the distressed debt market, Arch Coal Inc. paper was getting a boost as details emerged about the company's planned second-lien offering.

The company is selling $300 million second-lien notes due 2019, the proceeds of which will be used to fund a previously reported tender offer for the 8¾% notes due 2016. Though the new issuance was expected, bonds were seen rising 1 to 3 points on the day.

But following the downward trend were Gymboree Corp.'s bonds, which fell 4 to 5 points after the company reported weak earnings for its fiscal third quarter.

The company also lowered its outlook.

Arch Coal debt rises

Details on Arch Coal's planned offering of $300 million second-lien notes due 2019 emerged Thursday, giving the company's existing debt a boost.

A trader said the 7¼% notes due 2021 improved by over 1½ points to close around 77 5/8. The 7¼% notes due 2020 meantime gained 1½ points to around 781/2.

The trader also saw the 9 7/8% notes due 2019 rising 3 points to 893/4.

"They were definitely better," said another trader, pegging the 9 7/8% notes around 90 and the 2020 maturity around 781/2.

A third trader said the 7% notes due 2019 moved up over a point to 80 3/8.

Arch Coal intends to use proceeds from the sale, combined with funds from an add-on to a credit facility and cash on hand, to fund the cash tender offer for its 8¾% notes.

After word of the pending new deal hit the marketplace, Fitch Ratings downgraded the coal producer's senior notes to CCC+. The new notes were given a B+ rating.

Standard & Poor's rated the new issue at CCC+.

But while Arch was having an up day, sector peer Alpha Natural Resources Inc. was not.

A trader said the 6% notes due 2019 dropped 2 points to 871/2. Another market source placed the 6¼% notes due 2021 at 871/2, which was down nearly a point.

Gymboree takes a dive

Gymboree's 9 1/8% notes due 2018 took a dive Thursday after the company reported dismal third quarter results.

One trader said the debt was down almost 5 points at 921/2. Another trader pegged the issue at 92½ bid, 93 offered, which he said was down 4 to 5 points.

For the fiscal third quarter ended Nov. 2, the children's wear retailer reported a loss of $24.4 million, which compared to a profit of $4.9 million the year before. Net sales dipped 0.5% to $309.9 million and same-store sales declined 4%.

Gross margin fell to 39.8% from 40.3%.

The company also revised its outlook for its fiscal year ending Feb. 1. Gymboree expects to see adjusted EBITDA of $125 to $130 million, combined with a decline in same-store sales. In its previous forecast, the company said it was expecting EBITDA to be over the last fiscal year's level of $161.8 million.

Logan retreats a bit more

Logan's Roadhouse Inc.'s 10¾% notes due 2017 remained weak on Thursday, though it was "not quite as bad as [Wednesday's] bloodbath," a trader said.

The company reported earnings in the previous session and the disappointing numbers resulted in a nearly 10-point drop.

Come Thursday, the trader said the issue was off just slightly at 763/4.

For the quarter ended Oct. 27, the Nashville-based restaurant operator reported net sales of $147 million, a 2.2% decline from the previous year. Comparable restaurant sales dropped 5.2% and the average check amount improved by 1.4% - despite a 6.5% decrease in customer traffic.

Net loss was $12.07 million, which compared to $10.06 million the year before.

In the earnings release, the company attributed a dip in sales to a challenging economic and competitive market.

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