Claire’s Stores rises on earnings; hopes of new capital boost RadioShack; Gymboree, Rue21 gain

By Stephanie N. Rotondo

Phoenix, Aug. 28 – With one more trading day left ahead of the long holiday weekend, things were slowing down in the distressed debt market on Thursday.

One trader said he wasn’t busy, adding, “I don’t think anyone was.”

But even amid the limited liquidity, the retail world was gaining strength during the session.

Claire’s Stores Inc. bonds “wound up being better,” a trader said, after the Chicago-based jewelry and accessories retailer held a conference call to discuss its quarterly results. The company released its earnings statement late Wednesday, posting a narrower net loss and improved total sales.

Also in the retail space, RadioShack Corp.’s debt was unchanged to better as investors continued to react to news out from earlier in the week regarding a potential rescue financing package from Standard General LP, the company’s second-largest shareholder.

In Thursday trading alone, the company’s stock jumped over 30%.

Among recently topical names, Momentive Performance Materials Inc. paper remained “fairly active,” a trader said.

The bonds have been busy of late as a hearing on the company’s plan of reorganization was under way. Late Tuesday, a judge approved the plan, with conditions.

A trader pegged the 10% senior secured notes due 2020 at 92½ and the 8 7/8 first priority senior secured notes due 2020 at 94, up a little more from the midweek session.

NII Holdings Inc. also remained active, according to another trader. He saw the 7 5/8% notes due 2021 falling over half a point to 15 5/8.

However, both the 7 7/8% notes and the 11 3/8% notes due 2019 were half a point higher, at 66½ and 67½ respectively.

That name has been active ever since the company put out earnings and warned of a likely bankruptcy filing earlier this month. That activity was further spurred on when the company said it was selling its Chilean subsidiary for an undisclosed sum.

Claire’s higher post-numbers

A trader said Claire’s Stores’ debt improved following the company’s late Wednesday earnings release and subsequent conference call on Thursday.

He deemed the 8 7/8% notes due 2019 and the 7¾% notes due 2020 up 7 to 8 points, the former in an 88 to 89 context and the latter around 77.

He also noted that the senior paper was “up a couple points,” trading around “104 and change.”

Another trader said the 7¾% notes were up over a point at 76¾.

For the quarter ended Aug. 2, Claire’s posted net sales of $377.8 million, a 3% increase year over year.

The company noted that the increase was due in part to a favorable foreign currency exchange.

Consolidated same-store sales, however, dropped 0.6% for the quarter. North American sales declined 2.9%, while European sales improved by 2.5%.

Gross profit percentage fell to 49.8% from 50.6%.

Adjusted EBITDA came to $64.5 million, versus $64 million the year before. Net loss was $20.57 million, just slightly better than the $20.67 million loss posted the year before.

At quarter-end, the company had cash and equivalents of $29.5 million, plus $92.2 million of borrowing availability from its credit facility.

RadioShack hopes for financing

RadioShack’s 6¾% notes due 2019 were also gaining ground, according to one trader.

The trader said the bonds put on “1 and change” points to end around 43.

Another trader also saw the issue trading around 43, but said that wasn’t much changed from recent levels.

“They kind of popped the other day” on news the company could be getting a rescue financing package that would allow it to stave off a bankruptcy filing, the trader said.

That news has also resulted in large gains for the Fort Worth, Texas-based electronics retailer’s stock (NYSE: RSH), which jumped 34 cents, or 31.19%, to $1.43 in Thursday trading alone.

On Tuesday, it was reported that Standard General – a hedge fund holding about 10% of RadioShack’s equity – was looking to provide a new financing to the company as it attempts to turn itself around.

The potential cash infusion would be via the issuance of new debt or equity.

Additionally, the fund wants to refinance a $250 million second-lien term loan held by Salus Partners Capital LLC and Cerberus Capital Management LP. Those creditors had previously slapped down a plan to shutter as much as 1,100 stores and taking them out of the equation would allow the company to be more aggressive in closing underperforming stores.

If RadioShack can’t line up new financing, it is projected that it will burn through all of its cash by the end of 2015.

Gymboree, Rue21 gain

Elsewhere in the retail arena, Gymboree Corp.’s 9 1/8% notes due 2019 were “up 2 points from a couple days ago,” a trader said, seeing the issue at 59.

The children’s clothing retailer is slated to release quarterly results on Sept. 10.

And, Rue21 Inc.’s 9% notes due 2021 inched up half a point to 81, the trader said, the bonds have been moving up since the company held a conference call earlier in the week to discuss its latest earnings.

However, the call was for lenders and bondholders only, as the company typically does not disclose its financial statements to the public.

© 2015 Prospect News.
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