Weak earnings spell trouble for Cumulus, iHeartMedia debt; Men’s Wearhouse notes tank

By Stephanie N. Rotondo

Seattle, Nov. 6 – The distressed debt market remained under pressure as the week came to a close, even as the latest jobs report indicated the economy was gaining strength.

While the news had positive implications, it also meant that the possibility of an interest rate increase in December was higher.

Additionally, investors continued to grow concerned about weak quarterly results.

Cumulus Media Inc.’s bonds, for instance, were “really hit” Friday following the company’s earnings release and conference call on Thursday, a trader said. Another trader said the debt dropped 20 points “post-lowering guidance.”

Also in the media and telecommunications space, iHeartMedia Inc. paper remained under pressure. The multimedia company reported its earnings on Thursday as well, reporting a wider loss.

In the retail sector, the Men’s Wearhouse Inc.’s 7% notes due 2022 plunged after the company “warned on weak sales and reduced guidance,” a trader remarked.

Cumulus comes in

A trader said “something is awry” with Cumulus Media bonds after the company reported disappointing quarterly results.

The trader said the 7¾% notes due 2019 were closing Friday’s session in a 43¼ to 44 context. That compared to previous trades around 66.

Another trader deemed the debt down 20 points, trading around 43.

On Thursday, the Atlanta-based radio broadcasting company reported a 7.8% decline in revenue year over year, as well as an 11.5% drop in adjusted EBITDA.

Net revenue was $289.4 million. Adjusted EBITDA was $70.6 million.

The quarterly loss per share was $2.32, which compared to earnings per share of a penny the year before.

The results were impacted by a $565.6 million impairment charge on intangible assets and goodwill.

Analysts had predicted EPS of 3 cents on revenue of $297.5 million.

One market source indicated that management – including Mary G. Berner, who took over as chief executive officer on Oct. 13 – gave few details as to how the company intended to improve its financial position during its conference call.

iHeart breaks down

iHeartMedia bonds continued to weaken in Friday trading, just one day after the San Antonio-based company released its latest financial statement.

“Just more fallout from earnings,” a trader said, seeing the 10% notes due 2018 sliding into the mid-30s, as the 14% notes due 2021 moved into the high-20s.

Another trader saw the 10% notes losing 5½ points on the day to end at 35. The 9% notes due 2021 slipped just a quarter-point to 75, while the 11¼% notes due 2021 declined nearly 3 points to 72¼.

However, he said the 9% notes due 2019 inched up almost a point to 77¼, as the 9% notes due 2022 rose almost 2 points to 74¼.

Bonds were down 5 to 10 points across the board on Thursday as investors reacted negatively to the third-quarter results.

For the quarter, consolidated revenue was about $1.58 billion, down from around $1.63 billion in the comparable quarter in 2014.

Operating income in the third quarter was roughly $267 million, down from about $347 million in the prior year, and net loss was about $222 million, compared to a net loss of around $115 million in the 2014 quarter.

Also, consolidated OIBDAN for the quarter was around $458 million, versus about $479 million last year.

Men’s Wearhouse eyed

Men’s Wearhouse bonds waned Friday as investors prepared for the company’s upcoming earnings release.

A trader said the bonds fell about 15 points to trade in the high-80s.

The company reported preliminary results for its Jos. A. Bank brand late Thursday. In that update, the company also lowered it earnings per share forecast for the year.

In the third quarter, same-store sales at Jos. A. Bank declined by 14.6%, well below what the company had previously anticipated. The drop was blamed on a decline in traffic due to the company moving away from its “Buy One, Get Three Free” promotions.

Still, same-store sales as Men’s Wearhouse and K&G improved, by 5.3% and 3.7%, respectively.

The gains were attributed to higher transactions per store.

But as sales at Jos. A. Bank. are expected to recede 20% to 25% in the current quarter, the company lowered its earnings per share forecast to 46 cents to 51 cents in the fourth quarter, down from 87 cents previously.

For the year, EPS is expected to be between $1.75 and $2.00, down from $2.70 to $2.90.

Men’s Wearhouse will release its full quarterly report on Dec. 9.

© 2015 Prospect News.
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