Distressed debt slips in Tuesday trading session; Exide bonds get beaten up; Toys ‘R’ Us firm

By Stephanie N. Rotondo

Phoenix, Sept. 2 – The first trading day of the month – and the first back from the long holiday weekend – was a tough one for the markets, including the distressed debt market.

In equities, both the Dow Jones industrial average and the S&P 500 index finished the day modestly lower.

A trader said Exide Technologies Inc. remained under pressure, as it has been since mid-August when it was announced the company was under a grand jury investigation for the leak at its Vernon, Calif.-based recycling plant.

The trader said the 8 5/8% notes due 2018 fell 4 points in Tuesday trading to 36½.

Another market source echoed that level, “so down a few points,” he said.

In a regulatory filing made Aug. 15, Exide said it had received a grand jury subpoena on Aug. 8 “in connection with a criminal investigation involving its Vernon, California, recycling facility.” In addition to seeking documents related to materials transportation and air emissions, the subpoena indicated that “certain unidentified individuals” were also being investigated in relation to the March 2013 closure of the plant.

The plant was closed by state regulators after nearby arsenic levels were found to be unsafe.

The Milton, Ga.-based battery manufacturer and recycler filed for bankruptcy protections in 2013.

Toys ‘R’ Us gains

Before the holiday weekend, Toys “R” Us Inc. reported its second-quarter results, showing a wider loss than the previous year.

However, once market players returned from the long weekend, the Wayne, N.J.-based retailer’s bonds were trending higher.

At one desk, the 7 3/8% notes due 2018 were seen up over a point at 78¾ bid. Another source saw the 10 3/8% notes due 2017 at 89 bid, 89¼ offered, up from the day’s opening levels around 88½.

For the quarter ended Aug. 2, Toys “R” Us posted a net loss of $148 million, versus a loss of $113 million the year before.

But total sales improved nearly 3% to $2.44 billion and domestic same-store sales increased 1.5%.

International sales gained 2.5% year over year.

The company attributed the bigger loss to a hefty discounting effort that began at the beginning of the company’s fiscal year. The discounts were aimed at clearing out shelves to make room for new goods for the upcoming holiday season. Management said in the earnings release that the inventory clean-out had come to an end, however, leaving it well-positioned going into the holidays.

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