RadioShack bonds rack up losses; Gymboree drifts down; Rue21 releases earnings; oil, gas mixed

By Stephanie N. Rotondo

Phoenix, Dec. 5 – Distressed debt investors turned their attention to retailers on Friday, pushing most of them lower.

RadioShack Corp. has been on the decline for most of the week following the company’s announcement on Monday that it had received a notice of breach of covenant from lenders Salus Capital and Cerberus Capital Management.

The company was again in the headlines Friday, as the International Swaps and Derivatives Association said it had received a notice asking if the notice from lenders has triggered credit default swaps.

The company’s debt continued to drift lower, according to traders.

Gymboree Corp. was also weaker, though there appeared to be no news to act as a catalyst.

In Rue21 Inc. paper, the private retailer’s debt ran up on Thursday as investors prepared for the company’s earnings release after the market closed. Come Friday, the paper was unchanged to weaker on the day.

Away from retail, oil and gas names continued to be mostly soft and a further decline in oil prices did not help.

West Texas Intermediate crude oil fell $1.09, or 1.63%, to $65.72 per barrel. Brent crude oil dropped 84 cents, or 1.21%, to $68.80.

RadioShack retreats

RadioShack’s 6¾% notes due 2019 continued to retreat Friday, as the ISDA was asked if a notice of a breach of covenant meant credit default swaps were triggered.

“They continued to drift a little bit,” a trader said, seeing the paper trade “+/-20.”

Another trader said the debt was “down a couple points,” trading around 22.

On Monday, RadioShack received a notice from Salus and Cerberus alleging a covenant breach on a term loan the lenders provided. While the company has called the notice baseless, investors have reacted poorly to the news.

But because the notice served also as a notice of default – which would also trigger accelerated payments – it was requested that ISDA decide if the CDS was triggered.

Gymboree softens

Gymboree’s 9 1/8% notes due 2018 were also on the weaker side Friday, though a trader said he had seen “no particular news” to act as a catalyst.

The trader deemed the issue down 1½ points to a 34 to 34½ context.

Another trader also called the issue off 1½ points at 34½.

Gymboree is a San Francisco-based children’s clothing retailer.

Rue21 busy on numbers

Rue21 held a conference call after the market closed Thursday to discuss its third quarter results.

Leading up to the call, the company’s 9% notes due 2020 improved by about 2½ points, according to a trader.

In Friday trading, the trader said the debt was “basically where it was,” trading in a 79 to 80 range.

“There was a fair amount of activity in that range yesterday,” he said.

Another trader, however, called the issue off half a point at 80.

The Warrendale, Pa.-based retailer is a private company and as such, its conference calls are closed to the public.

Oil and gas mixed

Oil and gas names remained mostly under pressure Friday, but some names managed to tick a little higher.

Private independent exploration company Samson Investment Co.’s 9¾% notes due 2020 ended half a point lower at 54.

Goodrich Petroleum Corp.’s 8 7/8% notes due 2019 were meantime down half a point at 60 in a single trade, according to a trader.

Halcon Resources’ 9¼% notes due 2022 were then up almost a point at 72½, also in a single trade, the trader said.

But he said there were “lots of trades” in the 8 7/8% notes due 2021, which ended a point higher at 74¼.

The 9¾% notes due 2020 were steady at 74½.

Linn Energy LLC’s 6¼% notes due 2019 finished up half a point to 84¾.

Oil driller Parker Drilling saw its 7½% notes due 2020 ending over half a point weaker at 78¼. W&T Offshore Inc.’s 8½% notes due 2019 dropped 3½ points to 78.

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