RadioShack warns of bankruptcy, bonds fall; Gymboree continues to weaken; Cliffs debt slides

By Stephanie N. Rotondo

Phoenix, Sept. 11 – It was a weak day for many distressed names on Thursday.

RadioShack Corp.’s debt came in as the company not only reported another round of poor quarterly results, but also warned of a bankruptcy filing.

Among other retailers, Gymboree Corp. remained under pressure, just one day after the company put out its latest earnings report.

“They can’t seem to get out of their own way,” a trader said.

Meanwhile, Cliffs Natural Resources Inc. has been on the decline of late. A trader noted that the company is looking at shoring up its business via asset sales, putting up on the block “everything but the kitchen sink.”

RadioShack warns of bankruptcy

RadioShack reported “abysmal numbers” on Thursday, a trader said, seeing the bonds declining from the previous trades.

The trader pegged the 6¾% notes due 2019 at 35, down from 42.

Another trader said the issue was trading in the mid-30s.

The Fort Worth, Texas-based electronics retailer has been attempting to turn itself around and regain market share. Joseph C. Magnacca, chief executive officer, said in the earnings statement that the company’s turnaround plan was “advancing on many fronts, we may need additional capital in order to complete our work.” As such, the company has been in talks with stakeholders to come up with a long-term solution – a process that may include bankruptcy.

Chatter is that UBS AG and shareholder Standard General LP are working together to provide new financing for the company.

For the quarter, net sales and operating revenues fall to $673.4 million from $861.4 million the year before. Same-store sales declined 20%.

Loss from continuing operations was $137.4 million, of $1.35 per share, versus an operating loss of $51.4 million.

At the end of the quarter, RadioShack had total liquidity of $182.5 million, including $30.5 million in cash and equivalents and $152 million under its 2018 credit agreement.

Gymboree remains under pressure

A trader said Gymboree’s 9 1/8% notes due 2018 “continued to take on water” on Thursday, just one day after the company reported quarterly results.

The trader said the bonds fell as low as 35, coming back to end around 38, which he said was “still down 7 points, on heavy trading.

“They can’t seem to get out of their own way,” he said.

For the quarter ended Aug. 2, sales slid to $264.3 million from $290.9 million a year earlier, while comparable-store sales swooned by 10% from a year earlier.

Adjusted EBITDA shrank to $9.6 million in the latest period from $24.8 million for the second quarter of fiscal 2013.

The company’s net loss more than tripled to $31.2 million from the $9.4 million of red ink seen a year earlier.

On the liquidity front, Gymboree burned through some $14.6 million of its cash, bringing its cash balance at the end of the quarter down to $24.9 million from $39.4 million a year earlier.

The company said that it had $64 million in borrowings outstanding under its $225 million asset-backed loan facility, which translates to about $95.5 million of undrawn availability after deducting letters of credit and outstanding borrowings.

Looking ahead, the company expects to report full-year adjusted EBITDA in the range of $90 million to $110 million. Based on this guidance, Gymboree “expects to have sufficient liquidity during fiscal 2014 to service its debt and invest in the business to drive long-term growth.”

Also in the retail sector, Rue21 Inc.’s 9% notes due 2021 were deemed down 5 points to 75, according to a trader.

Cliffs’ debt on the decline

Cliffs Natural Resources’ debt has “been moving lower,” a trader said, as the company looks to shed assets and focus on its core business.

The trader said the 6¼% notes due 2040 lost 2½ points, ending at 83. The 4 7/8% notes due 2021 fell nearly 2 points to 87 5/8, while the 4.8% notes due 2020 gained almost a point to 89¾.

Another trader said the name was “down a couple points,” with the 2021 paper ending around 88 and the 2020 maturity finishing around 89.

Last week, the Cleveland-based mining company said it had hired Deutsche Bank to sell off its coal businesses and signed Jefferies to sell its Australian assets.

Last month, the company lost a proxy battle with Casablanca Capital LP, a hedge fund that wants the company to pare down and focus on its core iron ore business.

NII trends weaker

NII Holdings Inc. remained actively traded as the end of the company’s 30-grace period loomed.

One trader saw the 7 5/8% notes due 2021 fell almost half a point to 14½, while the 8 7/8% notes due 2019 dropped 3 points to 24.

The 10% notes due 2016 held steady at 23.

Another trader placed the 7 5/8% notes at 14½.

The Reston, Va.-based company missed a nearly $119 million coupon payment last month and thereby entered a grace period. If the payment is not made in 30 days, the company could be forced into bankruptcy and/or the debt accelerated.

However, prior to missing the payment, the provider of Nextel mobile services in Latin America and Mexico released its earnings results and warned that a bankruptcy might be looming anyway.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.