21st Century ‘up smartly’ after recapitalization news; Arch posts wider loss, debt gains steam

By Stephanie N. Rotondo

Phoenix, July 29 – Fresh news was driving several distressed debt bonds around on Tuesday.

21st Century Oncology Inc. paper was “up smartly,” a trader said, after the company said it had inked a deal with noteholders on a recapitalization plan.

The bonds were up as much as 5 points on the day.

Meanwhile, Arch Coal Inc.’s debt was unchanged to better, despite the coal producer reporting a wider quarterly loss.

Not much moved was RadioShack Corp. Market sources deemed the retailer’s bonds unchanged on the day, even as a new report from Moody’s Investors Service claimed that the company would run out of cash before the end of 2015.

21st Oncology boosted

A group of 21st Century Oncology noteholders has agreed to a plan to reduce the company debt, as well as provide additional liquidity, the company said in a regulatory filing on Tuesday.

On the news, the company’s 9 7/8% notes due 2017 were “up smartly,” gaining “almost 5 points” to end around 78, according to a trader.

Another market source placed the 9 7/8% notes at 78 as well, also deeming that up about 5 points.

As for the 8 7/8% notes due 2017, those closed at 101 3/8 bid, 101 5/8 offered, according to the source. That compared to 96 3/8 bid, 96½ offered previously.

A group of ad hoc noteholders agreed to support a plan that would require the Fort Myers, Fla.-based provider of radiation therapy to seek additional liquidity – either through an equity infusion or through the sale of subordinated debt – by Oct. 1. Alternatively, the company can also look to recapitalize its debt – which it might have to do if it cannot find additional capital by Aug. 31, according to the agreement.

If a recapitalization occurs, subordinated noteholders would receive 95% of new equity in the reorganized company, while existing stockholders would get the remaining 5%.

Stockholders would also receive warrants for another 10% of the equity.

Certain members of the noteholder group consented to provide additional funding in the interim. That funding will consist of an $8.5 million tranche A term loan – to be used for working capital and general corporate purposes – and a $9 million tranche B term loan, which will be used to fund purchases of equipment needed to conduct business.

Arch rises despite earnings

Arch Coal saw its bonds ending mostly higher, even as the St. Louis-based coal producer reported a larger loss for the second quarter.

A trader said the 7¼% notes due 2021 inched up half a point to 67, while the 7¼% notes due 2020 held steady at 68.

The 7% notes due 2019 meantime gained a point to 69½, he said.

For the quarter, Arch Coal reported a net loss of $96.9 million, or 46 cents per share. That compared to a loss of $72.2 million, or 34 cents per share, the year before.

On an adjusted basis, the loss was 46 cents per share. Analysts polled by Zacks Investment Research had predicted a loss of 48 cents per share.

Revenue declined 6.9% to $713.8 million, missing analysts’ expectations of $718.5 million.

Low coal prices remained a key driver of the wider loss, the company said. Ongoing competition from natural gas and transportation backlogs were also playing a role.

Still, the company ended the quarter with $1.25 billion of liquidity, including $1 billion in cash and equivalents.

“While Arch Coal’s second-quarter adjusted EBITDA was down significantly year over year, it was a big improvement from the first quarter and ahead of consensus expectations,” wrote Gimme Credit LLC analyst Evan Mann in a report out Tuesday.

Adjusted EBITDA was down 30% at $65 million, but estimates had placed the figure around $44 million.

EBITDA in the first quarter was $28 million.

RadioShack shakes off report

RadioShack’s troubles are far from over, according to a new report published by Moody’s on Tuesday.

In the report, the rating agency predicted that the struggling Fort Worth, Texas-based electronics retailer will face a cash shortfall by the quarter ending Nov. 1, 2015. Though the company has no immediate maturing debt obligations, operating losses will continue to weigh on liquidity and a continued cash burn could cause suppliers to run for cover.

Still, a trader said he “didn’t really see [the bonds] trade off” as the report came out.

He pegged the 6¾% notes due 2019 at 42¾, unchanged.

Another market source quoted the issue at 42½ bid, 42¾ offered.

NII comes in

NII Holdings Inc.’s debt was weaker Tuesday, though there was no fresh news to act as a catalyst.

A trader called the 7 5/8% notes due 2021 down nearly a point at 27¼ on “a bunch of trades.” The 10% notes due 2016 slipped half a point to 29.

The 8 7/8% notes due 2019 were “down almost 3 points,” he said, closing around 36¾. However, he noted that the decline came in just one trade.

NII Holdings is a Reston, Va.-based provider of Nextel mobile phone services in Mexico and Latin America.

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