Gymboree debt ends slightly higher, RadioShack bonds steady; Toys ‘R’ Us holders hire advisors

By Stephanie N. Rotondo

Phoenix, Sept. 12 – Distressed debt weakened Friday along with the broader markets.

Investors’ focus on recent high-yield bond deals from California Resources Corp. and Jupiter Resources Ltd., among others, was also weighing on volume in the space.

Still, some recent topical names continued to move around, especially in the retail arena.

A trader said Gymboree Corp.’s 9 1/8% notes due 2018 “continued to trade,” seeing the paper around 38, which he said was “maybe a smidge better.”

Another market source pegged the issue at 37 7/8 bid, 38¼ offered, up a touch from 37½ bid, 37¾ offered previously.

The bonds have been plummeting ever since the company reported earnings on Wednesday.

RadioShack Corp. was meantime holding steady, according to market sources.

One trader saw the 6¾% notes due 2019 at 36, a level echoed at another desk.

The Fort Worth, Texas-based electronics retailer also put out numbers this week. The earnings were released Thursday and in them, the company said it was looking at ways to improve its balance sheet and warned that a bankruptcy might just be the key to all its problems.

On Friday, Fitch Ratings downgraded the name to C from CC, following Standard & Poor’s negative action on Thursday.

S&P cut its rating on the company to CCC- from CCC.

Both agencies cited the likelihood that debt restructuring is imminent.

Also in the retail world, Toys “R” Us Inc. was on the decline, as a source saw the 7 3/8% notes due 2018 dropping 2½ points to 76½ bid.

It was reported Friday that holders of those notes had retained Moelis & Co. LLC to represent them in refinancing talks.

The article noted that speculations have been flying ever since the company put out its earnings earlier then scheduled, wondering if it was a move aimed at giving potential investors a look inside the company without restricting them. Citing an unnamed source, it is believed that the Wayne, N.J.-based toy store’s aim is to focus on its 2016 maturities and leave its other maturities until a later point.

For their part, holders of the 7 3/8% notes are hoping to derive some benefit from a covenant under the indenture that prevents the company from using its real estate assets as collateral.

NII expiration nears

A trader said NII Holdings Inc. paper was dipping ahead of the expiration of the company’s 30-day grace period.

He saw the 11 3/8% notes due 2019 at 64.

Another source placed the 10% notes due 2016 at 23, unchanged on the day.

On Aug. 15, the Reston, Va.-based provider of Nextel mobile services in Latin America skipped a nearly $119 million coupon payment on its 10% notes. As such, the company then entered into a 30-day grace period.

The missed payment came on the heels of another round of weak earning and a warning that a bankruptcy filing could be in the cards.

“Guess we will see what comes out of the weekend,” a trader said.

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