NIHD bonds continue to climb, bondholders said to consider organizing; RadioShack spirals down

By Stephanie N. Rotondo

Phoenix, March 6 - NII Holdings Inc. continued to dominate distressed debt trading on Thursday.

Traders saw the bonds climbing as much as 5 points on the day, though there hasn't been any fresh news since last week when the company reported earnings and issued a liquidity warning. However, one trader said chatter was that "somebody is trying to get bondholders to organize" ahead of a potential restructuring.

While NIHD was on the rise yet again, RadioShack Corp. was "getting hammered," a trader said. Bonds have been weak since the company posted its quarterly results earlier this week. The company also disclosed that it was planning to shutter 1,100 stores - a move that will break a covenant on its bank debt.

Meanwhile, the coal space was under pressure during the trading session. It was reported late Wednesday that Alpha Natural Resources Inc. was slapped with a hefty fine due to toxic wastewater being inappropriately released.

Alpha Natural's debt declined on the news and several names in the sector tagged along.

NIHD remains strong

As rumors swirl that bondholders are looking to organize, NII Holdings' debt continued to gain ground in Thursday trading.

One trader said there was "heavy volume" in the 7 5/8% notes due 2021, which he said closed up 3½ points to 401/2. The 10% notes due 2016 put on 4 points, he said, to finish around 491/2, while the 8 7/8% notes due 2019 increased almost 6 points to 50 5/8.

Another trader said the bonds were "on a rollercoaster ride," seeing the 7 5/8% notes hit a low of 37, climb back up to 41 and then go out around 40.

The Reston, Va.-based provider of Nextel mobile phone service in Latin America posted dismal fourth-quarter earnings on Friday and warned that it might not have enough liquidity to satisfy its obligations come 2015. Investors immediately responded by pushing the bonds way down.

But for the last few sessions, the paper has been rebounding. Though there hasn't been any fresh news, a trader opined that the moves are simply investors trying to figure out how long the company can continue and what their next moves are.

RadioShack tumbles

The hits kept coming for RadioShack Thursday, as its bonds dropped as much as 10 points on the day.

One trader said the 6¾% notes due 2019 were off only 4 points to 51. But another said the debt took a 10-point dip to close around 46.

"There was a fair amount [of bonds] trading around that level," he said.

Another trader placed the notes in a 47 to 48 context, which was down from the mid-50s.

On Wednesday, the fort Worth-based electronics retailer reported abysmal numbers and also said it was closing a quarter of its stores.

For the fourth quarter, net loss was $191.4 million, or $1.90 per share. That compared to a loss of $63.3 million, or 63 cents per share, the year before.

Sales fell over 20% to $935.4 million. Analysts polled by Thomson Reuters were expecting sales of $1.12 billion.

A 19% decline in same-store sales was attributed to lower customer traffic.

Cash and equivalents was $554.3 million, including $179.8 million in cash and $374.5 million in credit.

The company ended the quarter with $61.4 million in debt.

Though the decision to shutter about a quarter of its stores will likely help to improve liquidity, it will also breach a covenant on its $835 million credit facility, which requires the company to have at least 4,278 stores open.

To cure the breach, RadioShack will have to pay about $15,000 per closed store, or about $16.5 million.

Alpha Natural hit with fine

Alpha Natural Resources was levied a $27.5 million fine on Wednesday, due to wastewater leaks from its mines in five states.

In addition to the fine, the company has to pay $200 million for wastewater treatment systems at its sites.

The fine is the largest civil settlement ever handed down under the Clean Water Act.

The news did not bode well for the bonds.

"The bonds were getting hit," a trader said, seeing the 6¼% notes due 2021 declining 2 to 2½ points to 82.

Another market source pegged the issue at 82¼ bid, off 2¼ points.

The overall coal sector was also dragged down during trading.

Walter Energy Inc.'s 9 7/8% notes due 2020 lost over 1½ points to close around 751/2, according to a trader. Arch Coal Inc.'s 7% notes due 2019 meantime fell 2¼ points to 811/4.

For its part, Arch Coal announced on Wednesday that it was selling its Hazard subsidiary to Blackhawk Mining LLC for $26.3 million in cash.

The company will also divest $15.6 million of reclamation liabilitors to the purchaser and expects to divest another $43.8 million of reclamation surety bonding. Arch could also receive royalty payments of up to $35 million over the next five years.

Cengage loan frees

Cengage Learning Acquisitions Inc.'s $1.75 billion six-year first-lien covenant-light term loan (B2) freed up for trading, with levels seen at 101¼ bid, 101¾ offered, according to a trader.

Pricing on the term loan is Libor plus 600 bps with a 1% Libor floor and it was sold at an original issue discount of 991/2. There is 101 soft call protection for six months.

During syndication, pricing on the term loan was trimmed from Libor plus 700 bps and the discount was changed from 99.

The company's $1.95 billion credit facility also provides for a $200 million ABL revolver.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley Senior Funding Inc., Citigroup Global Markets Inc. and KKR Capital Markets are leading the deal that will be used to help fund the company's emergence from Chapter 11.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Sara Rosenberg contributed to this article

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