MolyCorp bonds give back gains; NII Holdings debt loses ground; retail sector under pressure

By Stephanie Rotondo

Phoenix, Aug. 7 – MolyCorp Inc. continued to be a notable name in the distressed space on Thursday, driven by news out on Wednesday of a new financing agreement.

However, though the bonds had initially popped on the news, at least some of the company’s debt gave back those gains.

Meanwhile, NII Holdings Inc. was decidedly weaker, though there was no fresh news out to act as a catalyst.

The retail arena was also softer, according to traders.

MolyCorp mixed, busy

MolyCorp’s debt continued to be notable as investors continued to react positively to news out Wednesday regarding a new $400 million financing commitment from Oaktree Capital.

However, the structure was mixed on the day.

In the company’s straight bonds, the 10% notes due 2020 were seen falling over 2½ points to 87 3/8 at one desk. Another trader said the issue “gave back yesterday afternoon’s gains, dropping from 90 all the way back to 87.”

A trader pegged the 3.25% convertible notes due 2016 at 74, up about a point.

The trader also placed the 5.5% convertible notes due 2018 at 61.875, which was about unchanged on the day.

As for the 6% convertible notes due 2017, they didn’t trade, the trader said, but he estimated they “should be 61.”

The stock closed up 31 cents, or 15.2%, at $2.35.

The Greenwood Village, Colo.-based mining company said Wednesday that it had inked a $400 million financing agreement with funds managed by Oaktree Capital Management LP.

Under the terms of the deal, Oaktree will provide MolyCorp up to $400 million via credit facilities and the sale and leaseback of certain equipment located at the company’s Mountain Pass facility. A total of $250 million will be available as soon as the deal closes, while the remaining $150 million will be available until April 30, 2016, assuming MolyCorp meets certain financial and operational conditions.

Additionally, MolyCorp issued warrants equal to 10% of the company’s outstanding stock to the lenders.

The company did not disclose what it plans to do with the new funds.

NII takes a hit

NII Holdings gave up ground in Thursday trading, though with no fresh news, it was unclear what was causing the declines.

A trader said the 7 5/8% notes due 2021 fell “almost 3 points” to 24¼. The 10% notes due 2016 dropped over 4 points, he said, ending at 24¾.

Another trader said the bonds “traded down a few points, but rebounded a touch.” He saw the 10% notes in a 26 to 27 context and the 7 5/8% notes “slightly lower” than that.

NII Holdings is a Reston, Va.-based provider of Nextel mobile services in Latin America and Mexico.

Retailers decline

It was a down day for retailers.

One trader saw RadioShack Corp.’s 6¾% notes due 2019 falling over a point to 39¼, while Gymboree Corp.’s 9 1/8% notes due 2018 declined 2½ points to 59.

Chilean grocery store operator SMU SA was meantime off 3 points, the 7¾% notes due 2020 closing at 65, the trader said.

And, he saw Logan’s Roadhouse Inc.’s 10¾% notes due 2017 losing “multiple points” to end around 72 5/8.

The trader said that it appeared the issue was down 1½ points on the day, but “it looks like more to me.”

At another desk, a trader said Gymboree’s 9 1/8% notes were “a couple points lower,” trading at 59.

Fannie, Freddie slip

Fannie Mae and Freddie Mac reported earnings on Thursday, with both agencies shower smaller profits than the previous year.

However, a trader noted that the numbers came in above expectations.

That wasn’t the only news out on the agencies during the session: It was also reported that Fairholme had decreased its common equity stake in the companies, though the fund maintained its preferred stock holdings.

Fairholme is currently fighting in court to prove that the government’s takeover of most of the profits stemming from the GSEs.

With the Fairholme news, early gains in both names were erased by day’s end.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) had inched up a penny to $11.51 in early trading, but came back to end the day down just as much at $11.49. Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) had meantime increased a nickel to $12.00 at mid-morning, but closed off a nickel at $11.90.

For the quarter, Fannie reported net income of $3.71 billion, down from $10.25 billion the year before.

However, the previous year’s earnings were helped by large one-time items, which were not present in the most recent quarter.

Revenue declined 14% to $5.29 billion, while net interest income dropped the same percentage to $4.9 billion.

Fannie said it planned to make a $3.7 billion dividend payment to the government in September, bringing its total payback to $130.5 billion – well over the $116.1 billion it took in bailout funds at the height of the financial crisis.

Freddie then posted net income of $1.4 billion, versus the $5 billion profit reported last year.

Like Fannie, Freddie’s earnings were inflated by certain one-time items.

Freddie is also planning a large dividend payment of $1.9 billion, bringing its total payments to $88.2 billion.

Freddie took $71.3 billion in bailout funds.

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