GT Advanced convertibles plunge on Chapter 11; J.C. Penney paper pops, but RadioShack retreats

By Paul Deckelman

New York, Oct. 6 – GT Advanced Technologies Inc.’s convertible bonds were sharply lower in active dealings on Monday, after the solar and LED equipment company announced that it filed for Chapter 11 bankruptcy protection.

The company’s underlying shares also nosedived on the news.

Elsewhere, RadioShack Corp.’s bonds, which had firmed smartly on Friday on news that the troubled electronics store chain operator had inked a deal to refinance some $590 million of bank debt, were seen giving up most of those gains on Monday, though on only light-volume trading.

Also in the retail sector, Gymboree Corp.’s bonds were better, although there was no fresh news out on the children’s apparel store chain operator that might explain the rise, traders said.

Department store operator J.C. Penney Co. Inc.’s bonds were also seen better on Monday, including its recently priced issue of five-year notes, which has clawed its way back up to par after trading at a discount around the end of last month.

The retailer meets with analysts this week at its big new store in Brooklyn and may shed some light on its plans to close other, less profitable outlets in order to improve earnings.

GT gets clobbered

The big news of the day in the distressed market was GT Advanced Technologies’ convertible bonds collapsing after the Merrimack, N.H. company announced that it had filed for Chapter 11 bankruptcy protection.

A trader said its 3% convertible due 2020 traded actively around 33 and were quoted near the close at 30 bid, 36 offered – way down from a recent price of 115 for the converts, $190 million of which priced in December 2013.

The older GT Advanced 3% convertibles due 2017, of which $220 million priced in September 2012, were previously 155, a second trader said, but also slid into the 30s.

A market source at another desk pegged the 2017 converts going home at 39 bid, well down from levels above 157 last week.

He said that those bonds plunged as low as under 23 in odd-lot trading and 25 bid in round-lots before bouncing off their bottom and back toward the upper 30s – still a loss of almost 120 points on the day. Over $25 million changed hands.

He also saw the 3% notes due 2020 fall as low as 24 bid from prior levels around 115 before closing at 30, with over $40 million of the notes traded.

“Yes, they were the most notable name,” yet another trader said. “They got absolutely decimated.”

He noted that the company’s underlying Nasdaq-traded shares also “got absolutely pounded,” losing some 92.76% of their value, or $10.25, to end at 80 cents per share on the day, versus $11.05 on Friday.

Volume of 183.2 million shares was 13 times the norm.

Gymboree gyrates higher

Elsewhere, the trader said that Gymboree’s 9 1/8% notes due 2018 “were trading better,” although he did not see any fresh news out on the San Francisco-based children’s apparel retailer that might explain the rise.

He saw the bonds going home at 34 bid, up solidly from levels in the 29 to 30 area last week.

A second source quoted the bonds up 3 points on the day at 33½ bid, with over $20 million traded, putting them high up on the most-actives list.

J.C. Penney paper pops

A trader noted that J.C. Penney’s recent new deal “was straddling par,” trading in a 99½ to 100½ context.

The Plano, Texas-based department store operator’s $400 million of 8 1/8% notes due 2019 had priced at par on Sept. 10, after the issue was upsized from an originally announced $350 million.

While it had initially surged above the 101 level in the aftermarket, it quickly came back in to trade around par, but had fallen as low as 97 bid on an intraday basis by last Wednesday, ultimately closing at 98 and staying down there for a while.

But on Monday, he said, the notes “had come back quite a bit, had come back nicely.”

A second market source saw them ending at 99½ bid, calling that up 1 point from last week’s round-lot levels, on volume of over $5 million.

He also saw the company’s established 5.65% notes due 2020 gain 1½ points on Monday to end at 86¾ bid, on volume of over $7 million.

Company executives are scheduled to meet with analysts on Wednesday at its big, glitzy new store in Brooklyn, its first in the heavily populated New York City borough. They are expected to further outline Penney’s plans to improve its modest profitability, including closing a number of smaller, older and unprofitable stores elsewhere.

RadioShack retreats

But things were going less well for another Texas-based retailer that is trying to get back in the black by also closing underperforming locations.

On Friday, RadioShack’s 6¾% notes due 2019 had jumped as high as 45 bid intraday from its previous levels around 36, before coming a little off those highs to end at 41¾, still a hefty gain of nearly 6 points.

The bonds surged after the Fort Worth-based electronics store chain operator announced an agreement with hedge fund Standard General – its biggest shareholder with a nearly 10% stake in the company – to refinance its existing $535 million revolving credit line.

The deal gives RadioShack immediate access to $120 million of additional liquidity heading into the all-important year-end shopping season, the key time in the retailing industry.

However, some analysts were not impressed, saying the company still has major issues to face and predicting that the new lifeline will only buy it a limited amount of breathing space.

That skepticism may have been a factor on Monday, when the bonds dropped back to around the 38 bid level going home, although volume was light, with only $2 million of large-block trades.

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