Momentive lenders denied vote change, bonds dip; Gymboree, RadioShack soften ahead of earnings

By Stephanie N. Rotondo

Phoenix, Sept. 9 – Distressed bonds were lightening up during Tuesday trading, with some names pressured by fresh news – or even just the expectation of news.

Momentive Performance Materials Inc. was in the news again on Tuesday, as the judge overseeing the company’s bankruptcy case denied some bondholders the chance to change their vote.

On the news, traders said the company’s bonds were drifting downward.

Also on the decline were retailers Gymboree Corp. and RadioShack Corp. Gymboree is scheduled to release its quarterly results on Wednesday and RadioShack’s are expected on Thursday.

RadioShack was also making headlines during the day’s session, as an analyst at Wedbush Securities deemed the company’s stock as worthless and predicted an imminent bankruptcy.

Momentive debt dips

U.S. Bankruptcy Court Judge Robert Drain denied a request from some bondholders of Momentive Performance to change their vote on a plan of reorganization.

The lenders wanted to change their vote to “yay” from “nay” in order to receive a previously proposed cash payment without any make-whole premium. Drain had previously criticized the group for not taking the cash payment to begin with and even gave them a day to come to terms with the company.

As a settlement wasn’t reached, Drain said the lenders couldn’t change their vote, meaning they will receive new debt to replace their old debt.

The news put pressure on the company’s first- and 1.5-lien notes.

One trader said the debt came “in about a point,” seeing the 8 7/8% notes due 2020 at 93 and the 10% notes due 2020 at 92.

Another trader pegged the 8 7/8% first-liens at 92½ bid, 93 offered.

The Waterford, N.Y.-based specialty chemical and polymer manufacturer filed for bankruptcy in April.

Gymboree, RadioShack weaker

Ahead of its earnings release on Wednesday, children’s clothing retailer Gymboree saw its 9 1/8% notes due 2018 fall a quarter-point to 61¼.

RadioShack’s 6¾% notes due 2019 were also weaker ahead of the company’s Thursday earnings release, with one trader seeing the paper in a 37 to 38 context, down from previous levels around 41.

The trader also noted that credit-default swaps were up on the day.

Another trader said the debt “wasn’t really trading, but has moved down into the high-30s.”

RadioShack was further pressured by a new analyst report from Wedbush Securities in which Michael Pachter cut the stock price target to $0.

In the report, Pachter predicted that a bankruptcy was imminent as the company’s plan to turn itself around failed to get at the heart of the problem.

“Brick-and-mortar electronics retailers will see persistent structural decline as internet sales continue to take share,” he wrote. “RadioShack has less financial flexibility to invest in price competitiveness, and its primary business is as a consumer-electronics convenience store. We believe the internet is more convenient.”

DynCorp dives

A trader said DynCorp International Inc.’s 10 3/8% notes due 2017 have lost 10 points from the end of August, seeing the paper finish Tuesday’s session around 84.

Another trader placed the issue in an 84 to 85 context.

August was a tough month for the U.S. defense contractor. Early in the month, the company said it was replacing Gordon Walsh, chief executive officer, just three weeks after Walsh took over the post.

The decision was based on a disclosure of accounting issues at a unit Walsh oversaw at L-3 Communications.

Then the company reported weak quarterly results, which were attributed in part to the drawdown of U.S. troops in Afghanistan.

Following that, it was reported that DynCorp had lost two of its intelligence contracts, which had a combined value of $71 million.

The hits just kept coming, as the company made the news again, this time for allegations of fraud in connection with an intelligence contract made with the U.S. Army.

As revenues shrunk in the previous quarter, it put additional pressure on covenants. As such, the company said in its earnings call that it planned to seek relief from lenders during the third quarter.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.