Cliffs selling more coal assets, ends mixed; RadioShack debt drops further; Claire’s declines

By Stephanie N. Rotondo

Phoenix, Dec. 3 – Fresh news was helping some distressed bonds move around in midweek trading.

Cliffs Natural Resources Inc. was mixed – though mostly toward the down side – as the company announced yet another asset sale.

“The stock was roaring,” one trader noted.

The equity (NYSE: CLF) rose 44 cents, or 5.39%, to $8.60.

Meanwhile, RadioShack Corp.’s debt continued to weaken following news out Tuesday. The company said Tuesday that lenders had served it with a notice of breach of covenant.

For its part, RadioShack is claiming that the notice is baseless.

In other retailers, Claire’s Stores Inc. reported earnings Wednesday. The company’s debt was trading lower after the numbers, as the company reported a slightly wider loss.

Cliffs selling assets

Cliffs Natural Resources, in its effort to pare down its business to focus on its core units, said Wednesday that it was selling in Logan County Coal assets in West Virginia for $175 million in cash.

The buyer is Coronado Coal II LLC. The deal is expected to be completed by the end of the year.

On the news, a trader said the 6¼% notes due 2040 inched up half a point to 63½.

However, he said the 5.9% notes due 2020 and the 3.95% notes due 2018 were weaker on the day.

The former issue fell a deuce to 64½, while the 3.95% notes declined over 3 points to 71.

Proceeds will be used to repay debt. It is expected that the company will note a $375 million to $425 million pretax loss for the fourth quarter.

RadioShack stumbles

RadioShack’s 6¾% notes due 2019 traded down 9 to 10 points on the heels of news regarding a potential covenant breach on a $250 million term loan.

One trader said the bonds declined 9½ points to 23. Another trader said the debt fell 10 points, trading into the low-20s.

On Tuesday, the Fort Worth, Texas-based electronics retailer said it had received a notice of a covenant breach from lenders Salus Capital and Cerberus Capital Management. The company has deemed the notice “wrong and self-serving.”

The notice comes amid the ever-important holiday sales season, something RadioShack in particular is relying heavily on as it attempts to turn itself around.

“Prompted by their narrow self-interest, they appear to be trying to manufacture a problem during the critical holiday shopping season in an effort to get out of a loan,” said Joe Magnacca, chief executive officer, in a statement released Tuesday.

In March, RadioShack said it wanted to shutter 1,100 underperforming stores, a move that would help to improve the bottom line. But Salus in particular was against that plan and given that the company needed lender support to go ahead with the closures, it was decided that fewer stores would be closed.

RadioShack said Salus is pushing the company to prepay debt and pay other fees in order to move forward with its store closure plans.

RadioShack said Salus’ requirements are unreasonable.

Claire’s sees wider loss

A trader said Claire’s Stores’ bonds were lower after the company reported a slightly wider quarterly loss.

He saw the 9% notes due 2019 falling 1½ points to a 99 to 99½ context. The 8 7/8% notes due 2019 meantime fell 5 points to “roughly 82,” the trader said.

For the third quarter, the Chicago-based jewelry retailer posted a net loss of $26.82 million. That compared to a loss of $25.47 million the year before.

Net sales also weakened, falling to $350.7 million. That was a 1.8% decline year over year.

Same store sales in North America dropped 1.6%, while European same store sales dipped 1.1%.

Adjusted EBITDA came to $50.7 million, versus $54.6 million the previous year. SG&A fell 2.6%.

As of Nov. 1, cash and equivalents was $30.2 million, including $2.3 million of restricted cash.

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