Alpha Natural to idle Cherokee mine, sector ends mostly softer; Toys ‘R’ Us remains in retreat

By Stephanie N. Rotondo

Phoenix, June 27 – The distressed debt market was a little soft going into the weekend, traders reported.

Traders also remarked that liquidity was thin, blaming that on it being a summer Friday.

The coal sector was mostly weak across the board as Alpha Natural Resources Inc. said it was idling a mine in Virginia. The idling was due in part to low demand for the commodity.

Toys “R” Us Inc. debt meantime continued to decline. The bonds have been slowly drifting lower for most of week, but were further pressured on Thursday when Fitch Ratings downgraded the debt.

Caesars Entertainment Corp., however, was inching higher, even as the Las Vegas-based casino operator said it was shuttering its Showboat casino in Atlantic City due to dropping revenues and high property taxes.

A trader saw the 9% notes due 2020 rising half a point to 83½.

Coal finishes soft

The coal space was mostly weaker on the day, following an announcement from Alpha Natural Resources regarding its Cherokee mine in Virginia.

The Bristol, Va.-based coal producer said late Thursday that it was idling the mine, due in part to declining demand for coal, but also because production at the site has been dwindling.

The company said that the production declines were due to the mine coming to the end of its resources.

A trader saw Alpha Natural’s 6% notes due 2019 falling a quarter-point to 73½.

Arch Coal Inc.’s bonds were also seen down a quarter-point across the board.

A trader said the 7% notes due 2019 were the most actively traded among distressed issues as a whole, seeing them finish at 76. The 7¼% notes due 2020 closed at 74½ and the 7¼% notes due 2021 at 73¼.

But another trader said Arch’s debt was trading “pretty much on top of where they have been.”

In Walter Energy Inc. paper, a trader said the bonds were actually better.

He pegged the 8½% notes due 2021 at 57 3/8, up almost half a point, and the 9 7/8% notes due 2020 at 62½, up a half-point.

At another desk, however, a trader said the 11% PIK notes due 2020 were a “smidge lower” around 83.

Toys’ bonds continue to slip

Toys “R” Us’ bonds remained soft Friday, continuing a trend seen for most of the week.

A trader placed the 10 3/8% notes due 2017 at 84½, down half a point from Thursday’s close.

Another trader said the issue was “a little bit lower again,” trading in an 83 to 84 context.

On Thursday, Fitch Ratings cut the ratings on both the 7 3/8% notes due 2018 and the 10 3/8% notes to CCC- from CCC.

The rating agency said the move was due to the Wayne, N.J.-based company’s deteriorating top-line and EBITDA, a continued loss of market share and a weak liquidity position.

Late last week, Toys “R” Us announced that it had fired its chief financial officer, F. Clay Creasey Jr. No reason was given for the termination, but the company has not been faring well financially, as stores like Wal-Mart Stores Inc. and Amazon.com Inc. take away market share.

Michael J. Short, a former CFO for AutoNation Inc., will replace Creasey.

The rest of the retail sector was on the mixed side.

A trader said J.C. Penney Co. Inc.’s 7.4% notes due 2037 inched up half a point to 87, but that its 6 3/8% notes due 2036 fell about that much to 82.

RadioShack Corp.’s 6¾% notes due 2019 “keeps sort of moving a little bit higher,” another trader said, seeing the issue trade in a 43 to 44 range.

Another trader deemed the debt up a deuce at 44.

Gymboree Corp.’s 9 1/8% notes due 2018 meantime were down “3 points from yesterday’s high,” a trader said, though he added that the issue was likely down just a point form the previous session’s close.

He pegged the notes at 68.

© 2015 Prospect News.
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