Sprint Nextel notes weaken following huge subscriber losses; American Realty recovers ground

By Stephanie N. Rotondo

Phoenix, Nov. 4 – The midterm elections were keeping things busy Tuesday and investors were particularly focused on the primary high-yield space.

For distressed debt, that meant there was little room to move.

However, there were a couple names on the radar – names that have not yet technically been designated as distressed, but names that could be on their way into that space.

One such name was Sprint Nextel Corp. The telecommunications company released weak earnings late Monday, showing a hefty subscriber loss for the quarter. Come Tuesday, the company’s debt reacted by drifting down.

American Realty Capital Properties Inc. was another name investors were keeping an eye on. The company has been in a pretty steady decline since reporting accounting issues and a Securities and Exchange Commission investigation on Wednesday. But Tuesday trading saw the company’s capital structure recovering some of those losses.

Sprint numbers decline

Sprint Nextel bonds ended the day weaker as investors reacted to the company’s poor quarterly results.

A market source deemed the 6% notes due 2022 down almost 3 points, seeing the paper trade in a 97½ to 97¾ range. The 6 7/8% notes due 2028 were meantime half a point weaker, trading between 95 and 95½.

For the quarter, the Overland Park, Kan.-based company posted a net loss of $765 million, compared to a loss of $699 million the year before. Additionally, subscriber losses were mounting, as the company lost a total of 500,000 monthly phone subscribers, though that number was partially offset by the addition of 261,000 tablet subscribers.

For the year, total subscriber losses came to 1.8 million.

Sprint also said that it was cutting its job force by 2,000 as it looks to reduce annual costs by $1.5 billion.

Looking forward, the company did not seem to have good news either, adjusting its 2014 EBITDA forecast to $5.8 billion to $5.9 billion, down from a previous estimate of $6.9 billion.

American Realty rebounds

American Realty Capital Properties’ 6.7% series F cumulative redeemable preferred stock (Nasdaq: ARCPP) recovered some of the ground lost since last Wednesday, though there was no fresh news driving the name higher.

The preferreds ended the day up 41 cents, or 1.96%, at $21.32.

In the company’s debt, the 3% notes due 2018 closed with an 88-handle, which compared to levels around 87¾ previously. The 3¾% notes due 2020 meantime ended in an 87 to 88 context, up from 85 to 86 on Monday.

The capital structure has been trending toward the down side since Wednesday when the company disclosed that its financial results dating back to 2013 could not be relied upon and that the Securities and Exchange Commission had launched an investigation into accounting irregularities.

On the heels of that news, the company also disclosed that chief financial officer Brian Block and chief accounting officer Lisa McAlister had resigned from their posts.

Come Monday, the news got even worse as RCS Capital Corp. said it was calling off its $700 million buyout of American Realty’s Cole Capital Partners. In a statement released early Monday, American Realty said it had received word of the deal’s cancellation “in the middle of the night.

“As we informed RCS orally and in writing over the weekend, RCS has no right and there is absolutely no basis for RCS to terminate the agreement,” the company said. “Therefore, RCS’s attempt to terminate the agreement constitutes a breach of the agreement. In addition, we believe that RCS's unilateral public announcement is a violation of its agreement with ARCP.”

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