Peabody stays strong post-earnings; Cliffs debt rises as BHP cuts expansion; Gymboree comes in

By Stephanie N. Rotondo

Phoenix, April 24 – A distressed debt trader said commodity names were rallying a bit in Friday trading.

For example, Peabody Energy Corp.’s bonds continued to trade up following the company’s earnings release on Thursday. Though the coal producer reported a wider-than-expected loss, the debt has been improving.

Meanwhile, Cliffs Natural Resources Inc. was jumping up during the session. The company’s stock also saw a decent gain, as rival iron producer BHP Billiton said it was cutting back on its expansion plans.

Away from commodities, Gymboree Corp. paper gave back some of the gains seen Thursday after the company reported its latest quarterly results.

The retailer saw marked improvement in its fiscal fourth quarter, but the end-of-the-year figures were not as good.

Peabody remains firm

Friday’s session brought more gains for Peabody Energy paper, which had started to trade significantly better on Thursday after the company posted earnings.

One trader said the 6% notes due 2018 were up over 2½ points at 82 5/8. A second trader deemed the somewhat recent 10% notes due 2022 “up another 1½ to 2 points” at 89½ bid, 90 offered.

A third market source pegged the 6½% notes due 2020 at 67¾ bid, up 2½ points on the day.

On Thursday, 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.

Cliffs’ debt boosted

Cliffs Natural Resources’ bonds were riding high in Friday trading, following in line with the company’s equity.

For its part, the gains in the stock were attributed to news that BHP, the largest mining company in the world, planned to reduce its expansion plans, which could stem an oversupply in coal.

One trader called the 5.95% notes due 2018 1¾ points better at 79. He also saw the 7¾% second-lien notes due 2020 at 69¾, which he said was up over 3½ points.

At another desk, the second-lien notes were pegged at “69 and change,” up 3 points.

That trader also saw the 8¼% first-lien notes due 2020 at 98½ bid, 99 offered, up from previous levels around 97.

As for the stock (NYSE: CLF) it was up 47 cents, or 8.45%, to $6.03.

The Cleveland-based company is slated to release its first-quarter results on Tuesday and according to Zacks, analysts are predicting a narrower loss.

Loss per share is forecast to be 19 cents, which would compare to a loss of 68 cents per share the year before. Revenue is expected to drop about 40% to $562.5 million.

Gymboree gives back

Gymboree’s 9 1/8% notes due 2018 gave back some of the gains incurred Thursday after the company reported better-than-expected quarterly results.

A trader said the issue was “quite active,” seeing the notes falling over 4 points to 51 7/8.

Another trader placed the bonds in a 52 to 53 zip code.

The paper was trading around 55 as on Thursday’s close.

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.

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