Cliffs bonds decline as tender, bond offer nixed; mining sector ends weaker; RadioShack rises

By Stephanie N. Rotondo

Phoenix, Dec. 4 – Cliffs Natural Resources Inc. remained in focus in the distressed debt realm Thursday, as the company scrapped plans for a tender offer and subsequent bond offering.

The company cited unfavorable market conditions.

Following the news, a trader said the iron ore producer’s debt “started to get hit, but then it came back a little.”

The 6¼% notes due 2040 were quite active, he said, with about $50 million exchanging hands. He said the issue hit a low of 56, but came back to end around 59½ – still down 4 points on the day.

The 3.95% notes due 2018 were also actively traded, the trader said, with about $30 million trading. The bonds ended just half a point weaker at 70½.

In the company’s other issues, the 4.8% notes due 2020 were seen ending steady at 62, while the 5.9% notes due 2020 finished off half a point at 64 ½.

The stock (NYSE: CLF) ended down 57 cents, or 6.63%, to $8.03.

The Cleveland-based company had previously launched a tender for five series of notes, totaling about $600 million of debt. The company planned to issue about $1.1 billion of new debt to cover the exchange.

But as the bonds and equity have been weighed on of late – even when the company said Wednesday that it was selling more West Virginia coal assets for $175 million in cash – the company felt it was time to put those refinancing plans on hold.

“With the unfavorable move in market rates during the past few weeks, the prudent decision is to postpone the company’s refinancing plans until market conditions improve,” said Lourenco Goncalves, chief executive officer, in a statement.

Moody’s Investors Service put in its 2 cents, cutting the company’s credit ratings to Ba3 and the senior notes to B1.

Mining mostly weak

Elsewhere in the mining arena, MolyCorp Inc.’s 10% notes due 2020 fell over a point to 61¾, according to a trader.

In the coal space, Walter Energy Inc.’s 8½% notes due 2021 inched up a quarter-point to 23½, a trader said. The 9 7/8% notes due 2020 held steady at 24.

Arch Coal Inc. was meantime softer, the trader said, seeing the 7¼% notes due 2021 declining a point to 35¼.

And, Alpha Natural Resources Inc.’s 6¼% notes due 2021 closed off a quarter-point at 41¾.

RadioShack looks to recover

Among other names recently in the headlines, RadioShack Corp.’s 6¾% notes due 2019 were seen recovering some after losing ground on allegations of a covenant breach.

The trader said the debt closed up a point at 64.

On Tuesday, the Fort Worth, Texas-based electronics retailer said it had received a notice of a covenant breach from lenders Salus Capital and Cerberus Capital Management. The company has deemed the notice “wrong and self-serving.”

The notice comes amid the ever-important holiday sales season, something RadioShack in particular is relying heavily on as it attempts to turn itself around.

“Prompted by their narrow self-interest, they appear to be trying to manufacture a problem during the critical holiday shopping season in an effort to get out of a loan,” said Joe Magnacca, chief executive officer, in a statement released Tuesday.

In March, RadioShack said it wanted to shutter 1,100 underperforming stores, a move that would help to improve the bottom line. But Salus in particular was against that plan and given that the company needed lender support to go ahead with the closures, it was decided that fewer stores would be closed.

RadioShack said Salus is pushing the company to prepay debt and pay other fees in order to move forward with its store closure plans.

RadioShack said Salus’ requirements are unreasonable.

Claire’s under pressure

Claire’s Stores Inc. also continued to be on the radar following the company’s earnings release on Wednesday.

A trader saw the 7¾% notes due 2020 falling a point to 59, as the 8 7/8% notes due 2019 weakened a quarter-point to 81¾.

For the third quarter, the Chicago-based jewelry retailer posted a net loss of $26.82 million. That compared to a loss of $25.47 million the year before.

Net sales also weakened, falling to $350.7 million. That was a 1.8% decline year over year.

Same store sales in North America dropped 1.6%, while European same store sales dipped 1.1%.

Adjusted EBITDA came to $50.7 million, versus $54.6 million the previous year. SG&A fell 2.6%.

As of Nov. 1, cash and equivalents was $30.2 million, including $2.3 million of restricted cash.

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