RadioShack tumbles after 'abysmal' earnings, store closure news; NII attempts to regain ground

By Stephanie N. Rotondo

Phoenix, March 4 - The distressed debt market was generally higher Tuesday, though not all credits were following the day's trend.

RadioShack Corp., for instance, dropped "10 points at the open," a trader said, after the company reported fourth-quarter results. The electronics retailer also said it was shuttering more than 1,000 stores - a move that will break a covenant on its bank debt.

But NII Holdings Inc. managed to stem its recent losses as it reversed course during the session. The bonds had been steadily declining since Friday when the company reported earnings and warned that liquidity was not enough to satisfy its obligations come 2015.

Among other recently topical names, Forest Oil Corp.'s 7¼% notes due 2019 remained weak, falling to a low of 82 before rebounding to 831/2.

That was still down 1½ points on the day, a trader said.

"There was quite a bit of activity in them," he added.

The oil and gas exploration company reported earnings last week that failed to entice investors. Additionally, the company said it was having issues getting its Eagle Ford shale property up to production targets.

Also softer were Caesars Entertainment Corp.'s bonds. On Monday, the company said it was selling four of its properties to an affiliate for $1.8 billion.

The assets are valued at $2.2 billion.

The Las Vegas-based casino operator also published preliminary quarterly results that came in below market expectations.

A trader saw the 10% notes due 2018 at 453/4, off "1 and change" points. Another market source pegged the issue at 47 bid, down a point.

RadioShack plummets

RadioShack's 6¾% notes due 2019 took a decent hit Tuesday after the company posted earnings and said it was closing 1,100 stores.

A trader said the debt was "down 10 points at the open," though it rebounded a touch to end around 561/4. Still, that was down 8 to 9 points, according to the trader.

"They had abysmal numbers," he said, adding that the bonds saw "pretty heavy volume for them."

Another trader said the issue hit a low of 55 but went out around 58.

That compared to levels in the mid-60s on Monday.

As for the stock (NYSEL RSH), it dropped 47 cents, or 17.28%, to $2.25.

For the fourth quarter, the Fort Worth-based company reported a net loss of $191.4 million, or $1.90 per share. That compared to a loss of $63.3 million, or 63 cents per share, the year before.

Sales fell over 20% to $935.4 million. Analysts polled by Thomson Reuters were expecting sales of $1.12 billion.

A 19% decline in same-store sales was attributed to lower customer traffic.

Cash and equivalents was $554.3 million, including $179.8 million in cash and $374.5 million in credit.

The company ended the quarter with $61.4 million in debt.

Though the decision to shutter about a quarter of its stores will likely help to improve liquidity, it will also breach a covenant on its $835 million credit facility, which requires the company to have at least 4,278 stores open.

To cure the breach, RadioShack will have to pay about $15,000 per closed store, or about $16.5 million.

NIHD inches back up

After being on a losing steak of late, NII Holdings' paper was inching back up in Tuesday trading.

A trader called the 10% notes due 2016 up over half a point at 44 1/8. The 7 5/8% notes due 2021 put on "close to 2 points" to close around 75 3/8, while the 8 7/8% notes due 2019 rose over 2½ points to 44 1/8.

Another trader said the debt was "up a few points," the 11 3/8% notes due 2019 at 77 bid, 78 offered, the 7 7/8% notes due 2019 at 74 bid, 75 offered, the 10% notes around 45 and the 7 5/8% notes around 35.

There was no fresh news to account for the upward move. In fact, the company received another downgrade during the session, this time from Moody's Investors Service.

The rating agency cut the Reston, Va.-based company to Caa1 from B3. That followed Standard & Poor's rating cut on Monday.

S&P moved the company to CCC from CCC+.

On Friday, the provider of Nextel mobile phone service in Latin America reported its fourth-quarter results. During that time period, the company lost 247,000 subscribers.

Net loss was $745.8 million, or $4.33 per share.

The company ended the year with $5.8 billion in debt and $2.4 billion in cash and equivalents.

Though company management remained optimistic about the way forward, liquidity issues were raising concerns.

"These concerns regarding the company's liquidity, in combination with the potential impact if the company cannot satisfy certain financial covenants under its existing operating company debt obligations in 2014, raise questions about the company's ability to continue as a going concern," NII said in the earnings release.

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