Gymboree reports earnings rise, bonds jump higher; Peabody firm despite wider loss; FMG active

By Stephanie N. Rotondo

Phoenix, April 23 – A fresh batch of earnings was pushing around a couple distressed debt names on Thursday.

Gymboree Corp. had a positive fiscal fourth quarter, reporting an increase in sales and earnings. That news resulted in a 6-point gain for the company’s bonds.

Meanwhile, coal producer Peabody Energy Corp. was moving up, even as the company reported a wider loss.

Still, the company noted that cost-cutting measures helped to offset depressed coal prices and hedging losses.

Away from earnings, FMG Resources’ bonds remained “fairly active,” a trader said, following a new deal that priced Wednesday and the announcement of a redemption.

Gymboree boosted by earnings

A trader said Gymboree 9 1/8% notes due 2018 were “up big after numbers” on Thursday.

The trader deemed the debt up 6 points at 55.

Another trader echoed that level and the gains that got it there.

For the fourth fiscal quarter ended Jan. 31, the San Francisco-based children’s clothing retailer posted net sales of $375.6 million, up 7% year over year. Comparable sales improved 5%.

Adjusted EBITDA came to $32.3 million, up from $25 million the year before. Net loss meantime narrowed to $7.4 million from $167.2 million.

But while the quarter saw improvement overall, the fiscal year’s results were a little more lackluster.

Net sales were $1.23 billion, compared to $1.24 billion the previous year. Comparable sales fell 3%.

Adjusted EBITDA fell to $93.7 million from $119.7 million.

And, net loss was $574.1 million, over twice as large as the previous fiscal year’s loss of $203 million.

The wider loss was attributed to a $591.4 million non-cash goodwill impairment charge and intangible asset impairment charge taken in the third fiscal quarter.

Peabody’s loss widens

Peabody Energy also had earnings out on Thursday. The numbers came in well below analysts’ expectations.

However, traders were still seeing strength in the company’s bonds.

One trader called the 6½% notes due 2020 up over a point at 65¼. The 6% notes due 2018 were seen rising 3 points to 80¾.

Another market source placed the 6½% notes at 65¼, up a deuce.

A third trader said the 10% notes due 2022 – a deal that came in early March – were up 1½ points, trading around 87½.

The St. Louis, Mo.-based company reported a first-quarter loss of $176.6 million, or 65 cents per share. That compared to a loss of $48.5 million, or 18 cents per share, the year before.

On an adjusted basis, the loss per share was 62 cents, wider than the 19 cents posted in the same quarter of 2014.

Peabody had previously given adjusted per share guidance of 32 cents to 39 cents.

Revenue fell 5.5% to $1.54 billion. The decline was attributed in part to lower coal prices.

Sales volumes dipped 1.1%.

Analysts had forecast revenue of $1.6 billion.

Looking forward, Peabody said the current quarter would likely result in a loss per share of 49 cents to 59 cents.

Analysts were initially projecting a loss of 35 cents per share.

The company also slashed its demand and production forecasts for the year. U.S. coal demand is expected to decline 80 million to 100 million tons in 2015 and accelerated production cuts are slated for the second half of the year. Peabody slashed its capital expenditure budget to $170 million to $190 million, down from $180 million to $200 million.

But while Peabody paper was ending with a positive tone, the rest of the coal market was not.

A trader said Arch Coal Inc.’s 7¼% notes due 2020 fell 1½ points to 35¼, while Alpha Natural Resources Inc.’s 7½% notes due 2020 held steady at 39¾.

Another source saw Alpha’s 6¼% notes due 2021 at 22½ bid, down 1½ points.

FMG remains busy

FMG Resources continued to be a notable name, just one day after the company sold $2.3 billion of 9¾% notes due 2022 at 97.608.

Proceeds from the new issue will be used to redeem the 6% notes due 2017 and 6 7/8% notes due 2018.

A trader said the new issue – the 9¾% notes – “traded up a bunch,” closing around 102½. The 8¼% notes due 2019 were meantime seen “up a little bit” around 86½.

A second trader placed the new deal at 102 3/8, still well up from the issue price. He said the 6 7/8% notes due 2022 rose 3 points to 75¼.

The 6 7/8% notes due 2018 finished up a touch at 103¾, he said, though he called the 8¼% notes much weaker at 85¾.

In mid-March, the Australian iron ore producer nixed plans to sell $2.5 billion of senior secured notes, as well as a proposed tender offer for three series of notes: the 2017, 2018 and 2019 maturities.

At that time, the company attributed the cancelled deal to unfavorable market conditions.

Elsewhere in the iron arena, Cliffs Natural Resources Inc. was heading into higher territory, though with no fresh credit-specific news to act as a catalyst.

A trader pegged the 8¼% notes due 2020 at 97¼, a point better on the day. The 5.95% notes due 2018 were seen at 77 – up almost 3 points – while the 4 7/8% notes due 2021 rose nearly a point to 50¾.

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