Quiksilver bonds, stock take dive as earnings miss; distressed space finishes week mostly soft

By Stephanie N. Rotondo

Phoenix, Sept. 5 – Apparel company Quiksilver Inc. was the notable name of the day in Friday’s distressed debt market, as investors reacted to the company’s poor third-quarter results.

A trader said the 10% senior notes due 2020 ended the day at 63, after opening at 53 and trading as high as 67. He noted that the issue “hadn’t traded in the last two to three weeks,” seeing the paper previously trade on Aug. 14 at 80.

But the 7 7/8% senior secured notes due 2018 finished the session up 4 points at 92¾.

The company’s stock (NYSE: ZQK) also got hammered, falling 70 cents, or 24.73%, to $2.13.

The Huntington Beach, Calif.-based company released its earnings late Thursday.

For the quarter ended July 31, Quiksilver posted a net loss of $220.1 million, or $1.29 per share. That compared to a profit of $2.1 million the year before.

Revenue dropped 19% to $395.7 million. On a segmented basis, revenues were most impacted in the Americas, declining 26%. The Europe-Middle Eat-Africa segment saw revenues fall 16%.

Analysts polled by Thompson Reuters had predicted a 2-cents per share profit on revenue of $441 million.

Gross margins slipped to 47.8% from 49.1%.

Last year, the company began a multiyear plan to turn itself around, focusing on core brands and cutting costs. But the quarter’s results brought that plan and its progress into question.

“Quiksilver is experiencing declining revenue and deteriorating credit measures, leaving some doubt as [sic] the efficacy and timing of its profit improvement program,” wrote Gimme Credit LLC analyst Kim Noland in an afternoon comment out Friday.

Market mostly weaker

In the rest of the distressed space, most names remained under pressure.

For their part, both NII Holdings Inc. and Caesars Entertainment Corp. were mixed on the day.

A trader said NII Holdings’ 7 5/8% notes due 2021 ended off half a point at14½, while the 8 7/8% notes due 2019 declined 1½ points to 27.

But the 10% notes due 2016 gained over a point, finishing the day at 26¾.

In Caesars’ bonds, the 6½% notes due 2016 held steady at 36, while the 10¾% notes due the same year put on a point to 41½.

The 9% notes due 2020 slipped a quarter-point to 80.

Getty Images Inc.’s 7% notes due 2020 were meantime a point weaker at 82, according to a trader.

And, Ukrainian poultry producer MHP SA saw its 8¼% notes due 2020 inching up slightly to 86½.

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