Distressed bonds gain ground in subdued trading; Sears Holdings reports wider loss, debt drops

By Stephanie N. Rotondo

Phoenix, Aug. 21 – The distressed debt space was again ticking higher on Thursday, though volume was a bit constrained.

Investors could be taking a breath as Federal Reserve bankers meet in Jackson Hole for the central bank’s annual meeting. The meeting was slated to begin late Thursday.

Many market players are also away from their desks, enjoying the last few weeks of summer.

The limited volume and empty desks could have helped Sears Holdings Corp.’s bonds stem any major losses, however, as the company reported a wider quarterly loss and its 30th consecutive sales decline.

One market source saw the company’s 6 5/8% notes due 2018 down just about a point at 89½ bid, 89 7/8 offered. Another source placed the issue at 89 ¼, down from 90.

For the second quarter, the Hoffman Estates, Ill.-based retailer reported a net loss of $573 million, or $5.39 per share. That compared to a net loss of $194 million, or $1.83 per share, the year before.

The previous year’s results included earnings from Lands’ End, which was spun-off in April.

Revenue fell to $8.01 billion from $8.87 billion. The company attributed the decline in part to the Lands’ End spinoff – a $330 million decrease in revenue, according to the company – as well as the fact that it had fewer open stores.

As for same-store sales, they were down 0.8%, even as online sales increased by 18%.

With results continuing toward the negative end, Sears said it was looking into its options, including the selling of more assets, closing more stores and more long-term flexibility from lenders.

Sears is continuing to look at how to monetize its remaining stake in Sears Canada, an effort that the company first announced in May. The company had reduced its stake in that unit to 51% in 2012.

Another option the company is looking at has to do with its auto centers. Sears is considering selling that portion of its business, or possibly forming some sort of partnership.

The good news is that liquidity was nearly unchanged quarter-over-quarter, with the company ending this most recent quarter with $839 million of cash and equivalents.

© 2015 Prospect News.
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