Gymboree debt rebounds after earnings-induced losses; coal firms; Energy Future notes improve

By Stephanie N. Rotondo

Phoenix, May 2 - The distressed debt market was firming up as the week came to an end, according to traders.

Gymboree Corp. was "still pretty active," a trader said. Bonds have been trading actively - and much lower - since the company reported dismal quarterly results.

However, in Friday trading, the bonds were experiencing a minor rebound.

The coal sector was also stronger even on the heels of weak earnings from Walter Energy Inc. on Thursday. Alpha Natural Resources Inc. also reported, and while the company did cut its production targets, the numbers came in better than analysts were expecting.

Energy Future Holdings Corp.'s debt also followed the upward trend, as it has been ever since the company filed for Chapter 11 protections on Tuesday.

Gymboree rebounds

A trader said Gymboree's 9 1/8% notes due 2018 "bounced off of yesterday's lows."

He called the paper up 1½ points to 641/2.

"There was pretty good volume there," he added.

Bonds have been actively trading since reporting earnings on Tuesday. Initially, the debt dropped 6 to 7 points and on Thursday, the bonds lost another 10 to 12 points.

For the fourth quarter ended Feb. 2, the San Francisco-based children's clothing retailer reported net sales of $351 million, which compared to sale of $397.6 million for the same quarter of fiscal 2012. However, the previous quarter was positively impacted by an additional week, which resulted in an added $19 million.

Same-store sales fell 9%, including online sales.

Net loss was $169.8 million and included a $157.2 million non-cash goodwill and intangible asset impairment charge.

Net loss for the same quarter of fiscal 2012 $5.4 million.

Adjusted EBITDA was $25 million, versus $47.7 million previously.

For the fiscal year, net sales were $1.24 billion, down from $1.28 billion in fiscal 2012. Same-store sales dropped 6%.

The company reported a wider net loss of $206.4 million, which compared to $10.4 million in fiscal 2012.

Adjusted EBITDA narrowed to $119.7 million from $161.8 million.

Among other retailers, a trader said Claire's Stores Inc.'s 8 7/8% notes due 2019 fell half a point to 821/2.

Coal on the rise

The coal sector was firming up in Friday trading.

Arch Coal Inc.'s 7¼% notes due 2020 rose a quarter-point to 761/2, according to a trader.

The trader also saw Walter Energy's 9 7/8% notes due 2020 gaining about a point to close around 651/2, as Alpha Natural's 6¼% notes due 2021 put on 1¼ points to 753/4.

On Thursday, both Walter and Alpha Natural reported earnings. Walter's missed analyst expectations, but Alpha Natural did better than expected.

However, both coal producers said that they were cutting production due to weak prices, which have been further depressed by oversupply.

Walter said it is expecting to produce 9 million to 10 million tons of metallurgical coal this year, down from previous estimates of 11 million to 12 million tons.

For its part, Alpha Natural said it expected to produce 15 million to 18 million tons of metallurgical coal in 2014, versus a previous estimate of 16 million to 20 million tons.

TXU powers up

Energy Future Holdings' Texas Competitive Electric Holdings Co. LLC bonds were finishing the day on a positive note.

Both tranches of the 10¼% notes due 2015 moved up to 7 5/8. The 10½% notes due 2016 also closed at 7 5/8, up just slightly.

The 15% notes due 2021 put on 1½ points to close around 281/2, according to a trader.

Energy Future, the parent company of Texas Competitive, filed for bankruptcy on Tuesday. Under a prepackaged bankruptcy plan, the company's lenders will take over ownership of the unregulated unit.

In other recent bankruptcy filings, a trader saw Desarrolladora Homex SAB de CV's 9¾% notes due 2020 slipping half a point to 11.

The Mexican homebuilder filed for bankruptcy on Thursday.

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