Walter Energy debt trades lower; RadioShack continues to gain as rest of retail space declines

By Stephanie N. Rotondo

Phoenix, May 27 - The distressed debt market was subdued Tuesday as players began returning to their desks after a long holiday weekend.

"I don't see a ton of activity," one trader said.

"It's a Tuesday after a long weekend," said another trader. "Friday was a quiet day, so you've got people just trying to get their heads back in the game."

The coal sector experienced a bit of a dip during the week's first trading session, according to one trader.

"Some of the coal names were definitely a little bit weaker," he said. Most notable of that space was Walter Energy Inc., whose bonds were "all over the place."

The trader said the 8½% notes due 2021 traded as low as 56, while the 11% PIK notes due 2020 fell "a couple points" to 80 bid, 81 offered.

As for Alpha Natural Resources Inc. and Arch Coal Inc., the trader said the names were "not all that active," but "definitely weaker," deeming the companies' respective debt down about a point.

However, another trader said Arch Coal's 7% notes due 2019 gained a quarter-point, closing at 77.

The second trader also saw Alpha Natural's 6¼% notes due 2021 slipping almost a point to 711/4.

A third source pegged the Alpha Natural issue at 72½ bid, up half a point.

RadioShack gains, sector slips

In the world of retail, RadioShack Corp.'s 6¾% notes due 2019 "continue to creep up," a trader said.

He placed the notes around 45, which compared to 41 previously.

Another trader echoed those levels, adding that the bonds were the day's most notable upward mover.

However, he also pointed out that the debt had gained in just "a handful of trades."

The bonds have been inching higher recently, despite the company having to alter its plan to close 1,100 stores due to a lack of lender approval. The company wanted to shutter that many stores in an effort to improve its bottom line.

At current credit-default-swap levels, investors are indicating they think there is an 86% chance the company will face some sort of default by June 2015.

Meanwhile, Claire's Stores Inc.'s 8 7/8% notes due 2019 dipped to 853/4. Gymboree Corp.'s 9 1/8% notes due 2018 were also off, trading down to 62.

Among restaurant names, Logan's Roadhouse Inc.'s 10¾% notes due 2017 ended a quarter-point softer at 811/4.

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