NII enters bankruptcy, bonds inch higher; Colt earnings disappoint; Gymboree debt slides again

By Stephanie N. Rotondo

Phoenix, Sept. 15 – The distressed debt market kicked off the new week with a not-unexpected bankruptcy filing and poor earnings.

The bankruptcy came from NII Holdings Inc. But the company had warned that the filing could be coming when it announced its latest quarterly results in early August.

The poor earnings meantime came from Colt Defense LLC. The gun manufacturer swung to a loss in the most recent quarter, due to dwindling sales.

Also topical was Gymboree Corp. The company’s debt has been off since releasing weak numbers and, according to one market source, the company has hired legal advisors to look over restructuring options.

NII files for bankruptcy

NII Holdings filed for bankruptcy on Monday, which marked the end of its 30-day grace period on a missed coupon payment on the 10% notes due 2016.

In its earnings release in early August, the Reston, Va.-based provider of Nextel mobile services warned that it might seek Chapter 11 protections, due to dwindling subscriber growth and thus, lower revenues.

The lower revenues in turn resulted in an inability to update the company’s infrastructure.

One trader said that on the news, the market “initially tried to take the bonds down a little bit lower,” but by the end of business, they were trending higher.

The trader saw the 11 3/8% notes and 8 7/8% notes due 2019 in a 63 to 64 range. The 10% notes due 2016 hit a low of 21½, he said, but ended at 24.

The 7 5/8% notes due 2021 closed around 15.

Another trader said there was “heavy trading” in the name, seeing the 7 5/8% notes up nearly a point at 15, the 8 7/8% notes up half a point at 23 and the 10% notes at 23¾, up almost a point.

The trader noted that the bonds have been trading flat, or without accrued interest, “for some time.”

A third trader placed the 10% notes at 24, the 7 5/8% notes at 15 and the 11 3/8% and 8 7/8% notes at 63.

Because of its inability to keep its technologies up to date, subscribers in Latin America and Mexico have been spurning Nextel’s services for those of America Movil SAB and Telefonica SA. In 2013 alone, the company lost 637,200 subscribers in Mexico.

The company listed assets of $2.88 billion and debt of $3.47 billion in court papers filed Monday.

Colt earnings weak

Colt Defense debt was “lower on disappointing numbers,” a trader reported Monday.

He said the 8¾% notes due 2017 fell to the high-60s from levels around 73 previously.

Another trader pegged the issue at 69¼, down 4 points from mid-last week, he said.

A third source quoted the paper at 68 bid, 70 offered.

In its 10-Q filed Monday, the West Hartford, Conn.-based gun manufacturer posted net sales of $49.63 million for the three months ended June 29. That compared to sales of $64.21 million the year before.

Net loss came to $12.6 million, versus a previous profit of $4.4 million.

Last month, the company secured an amendment to its term loan, eliminating and modifying certain covenants and providing for an extension to deliver certain financial information to investors. However, the company warned that it could still violate one or more of the covenants come the quarter ending Dec. 31, or possibly in 2015.

Colt has scheduled a conference call to discuss the results for Tuesday.

Gymboree dives again

Gymboree’s 9 1/8% notes due 2018 were “down another 5 points,” a trader said Monday.

He placed the issue at 33¼, noting that the paper had hit an intra-day low below 30.

About $40 million of the bonds were exchanged, he said.

Another trader said the debt hit a low of 29 before coming back to end “around 33.” That was “definitely still lower” from Friday levels, he said.

At another desk, the notes were seen as low as 28, but going out around 32, down 6 points on the day.

According to the third source, the company had hired Kirkland & Ellis LLP to look into its restructuring options.

Elsewhere in the retail world, RadioShack Corp.’s 6¾% notes due 2019 were treading water, even on the heels of the resignation of the company’s chief financial officer on Friday.

John Feray held the post for only seven months. His exit came the day after Feray hosted the quarterly conference call.

A trader quoted the notes at 35 bid, 36 offered.

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