Distressed debt gains strength; topical names remain pressured; RadioShack earnings disappoint

By Stephanie N. Rotondo

Phoenix, Oct. 22 - It was another firm day in Distressed Debt Land, traders reported Tuesday.

The day also saw "a little more activity," a trader said.

Most of the day's distressed dealings, however, focused on a few recently topical names, such as RadioShack Corp. The company's debt jumped dramatically on Monday after announcing an $835 million asset-backed loan from GE Capital. But then the struggling retailer released third-quarter results on Tuesday and those gains fell away.

NII Holdings Inc. was also on the downside, as the bonds have been for the last week. There has been no fresh news, aside from an equity downgrade on Monday.

The company is also expected to release earnings later this month.

RadioShack erases recent gains

A trader said RadioShack's 6¾% notes due 2019 "traded down a bunch" on Tuesday following the company's earnings release.

He placed the bonds in a 66 to 67 context, which was down from levels in the mid-70s on Monday. The debt had put on 4 to 5 points in the previous session on news the Fort Worth, Texas-based company had secured an $835 million ABL from GE Capital.

Come the earnings announcement, all of those gains were lost.

RadioShack posted a net loss of $112 million, or $1.11 per share, for the third quarter, which compared to a $47 million loss for the same quarter of 2012. Revenues dropped 11% to $805 million versus $898 million the year before.

Comparable store sales declined 8.4%.

According to one Forbes poll, analysts had been expecting a loss of 35 cents per share on revenues of $891 million.

The company said its new loan would give it more financial flexibility as it attempts to turn itself around. The proceeds from the facility will be used, at least in part, to refinance outstanding bank debt.

Among other distressed retailers, a trader said J.C. Penney Co. Inc. was active, with the 7.4% notes due 2037 "trading in the low-60s.

"They moved slightly higher throughout the day," he said.

But another trader called the issue off a touch at 621/4.

The second trader also saw the 7.95% notes due 2017 down a deuce at 75.

NII retreats further

NII Holdings' bonds have been under pressure of late. An equity downgrade from Credit Suisse on Monday did little to help the debt, which continued to flounder come Tuesday trading.

A trader said the 10% notes due 2016 fell over 2 points to 873/4, while the 7 5/8% notes due 2021 dropped 1½ points, closing around 673/4.

Another trader said the name was "softer," seeing the 10% notes losing a deuce to end around 88.

On Monday, Credit Suisse analyst Andrew T. Campbell cut his price target for the stock to $4.50 from $5 per share. Campbell cited "a more challenging outlook" for the company, as it looks to upgrade its service in Latin America amid high leverage levels.

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