Walter, coal sector continue leak; NII Holdings debt on the rise; Gymboree, rue21 inch higher

By Stephanie N. Rotondo

Phoenix, May 28 - The coal space continued to be a major focus of distressed debt investors on Wednesday, traders reported.

As was the case Tuesday, the sector was trending toward the softer side, with Walter Energy Inc. again leading the way.

One trader called the 9 7/8% notes due 2020 down over 2 points at 601/4. Another trader said the issue was "pretty active," trading in a 60 to 61 context.

The second trader also pegged the 11% pay-in-kind notes due 2020 at 79.

"So those continue to tick lower," he said.

Coal names have had a rough go, as demand for the product has decreased and prices along with it. Many coal producers are facing tough headwinds, but Walter Energy could be poised as the next one to fall.

Currently, Walter's debt-to-EBITDA ratio is just over 20x. By the end of the second quarter, the company needs to have gotten that figure to just 8x for the next 12 months or else it will breach financial covenants related to its revolving credit facility.

Still, investors haven't been to bullish on other coal names either.

A trader saw Arch Coal Inc.'s 9 7/8% notes due 2019 falling a point to 861/2, while the 7¼% notes due 2020 dipped just over half a point to 74 1/8.

The trader also saw Alpha Natural Resources Inc.'s 6¼% notes due 2021 off a quarter-point at 71.

Another market source pegged that issue at 71½ bid, down a point on the day.

NII bonds gain ground

A trader said that NII Holdings Inc.'s debt "seemed to be trading higher" toward the end of Wednesday session.

He saw the 10% notes due 2016 at 29 and said the 7 5/8% notes due 2021 were up a point intra-day at 261/2.

Another trader deemed the 10% notes steady at 291/4, but said the 7 5/8% notes were about half a point better at 261/2.

There was no fresh news out on the Reston, Va.-based provider of Nextel mobile phone services in Latin America and Mexico to act as a catalyst.

Retail roundup

Gymboree Corp.'s 9 1/8% notes due 2018 were "pretty active," though in terms of price the debt "didn't move much," according to a trader.

He saw the notes trading in a 62 to 63 range.

Another trader called the bonds up nearly half a point at 62 3/8, with almost $20 million bonds changing hands.

Among other retailers, a trader said rue21 Inc.'s 9% notes due 2021 "keep trading higher," seeing the paper move into the low-70s.

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