RadioShack debt dips as fund urges repayment of lenders; coal space bonds continue to decline

By Stephanie N. Rotondo

Phoenix, Aug. 1 – The distressed debt market remained under pressure Friday, the first trading day of the new month.

RadioShack Corp. bonds were getting hit, dropping nearly 2 points on the day. The losses came in the wake of news out Thursday in regard to a hedge fund’s proposal to pay off some creditors that had blocked part of the company’s turnaround plan.

Walter Energy Inc. paper was meantime continuing to decline, just one day after the company reported disappointing earnings. The coal sector as a whole was weak as well. For its part, Alpha Natural Resources Inc. might have been driven by news the company was considering shuttering 11 mines.

Caesars Entertainment Corp. was another soft one, though there was no fresh news to act as a catalyst.

A trader said the 10% notes due 2018 fell 1½ points to 31, while the 9% notes due 2020 slipped slightly to 83.

The 11¼% notes due 2017 lost nearly 2 points, ending around 86 3/8.

RadioShack comes in

RadioShack’s 6¾% notes due 2019 fell “almost 2 points” to 41, according to a trader.

On Thursday, it was reported that BlueCrest Capital Management has been urging the Fort Worth, Taxes-based electronics retailer to pay off secured lenders that blocked the company’s plan to shutter 1,100 stores.

BlueCrest owns equity and unsecured debt in the company. The private equity company said in a letter to RadioShack that it might be amenable to providing some financing, along with other creditors.

Earlier in the week, Moody’s Investors Service published a report claiming that the company will likely run out of cash by November 2015. In order to shore up its balance sheet and stem a cash burn, the company came up with a plan in which it would close 1,100 underperforming stores. But covenants on the company’s credit facilities made that impossible without lender approval and the lenders balked.

So instead, RadioShack plans to close just 200 stores.

Among other retailers, Rue21 Inc.’s 9% notes due 2021 were off over a point in a single trade at 74, according to a trader.

But Gymboree Corp.’s 9 1/8% notes due 2018 managed to buck the overall trend of the day, ending up a touch at 60 1/8.

More pressure for coal

The coal sector as a whole was weaker again Friday.

For its part, Walter Energy might have still been smarting from its lackluster earnings, which came out before the market opened on Thursday.

A trader said the 8 5/8% notes due 2021 dropped 1¾ points to 48¼.

For the quarter, the Birmingham, Ala.-based metallurgical coal producer reported consolidated revenues of $378.4 million, down from $441.5 million the year before. According to company management, continued low prices for coal was the main driver, as it did experience higher sales volume during the quarter.

Net loss was $151.4 million, or $2.33 per share. That compared to a loss of $34.5 million, or 55 cents per share, for the same quarter of 2013.

Excluding certain items, the adjusted loss was $128.3 million, or $1.97 per share.

Analysts polled by Bloomberg were expecting an adjusted loss of $1.69 per share on revenues of $376.6 million.

For the whole of 214, Walter Energy expects to produce 9 million to 10 million metric tons of coal. However, the company lowered its sales forecast to 9.5 million to 10.5 million tons, versus a previous estimate of 10.5 million to 11.5 million.

Elsewhere in the space, Alpha Natural Resources’ was weighed down as the company announced Thursday that it was considering idling 11 affiliated coal mines and other facilities in West Virginia.

The idling – which would occur by mid-October – would result in about 1,100 layoffs, the company said.

A trader pegged the 6¼% notes due 2021 at 62 7/8. The 9 7/8% notes due 2018 were off “3 and change points from a week ago,” the trader said, seeing the issue at 85½.

And in Arch Coal Inc.’s debt, a trader said the 7¼% notes due 2021 and 2020 ended at 63¼ and 64, respectively.

That was down almost a point and 2½ points, he said.

As for the 7% notes due 2019, they were unchanged at 66½.

© 2015 Prospect News.
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