Coal debt pressured, report says met coal prices have further to fall; Gymboree turns downward

By Stephanie N. Rotondo

Phoenix, Sept. 18 – The coal sector continued to be under pressure in distressed debt trading on Thursday.

The space has been struggling anyway, as metallurgical coal prices have tanked along with demand. But on Thursday, Goldman Sachs released a report that speculated prices have not yet hit a floor, further pressuring the sector.

“Coal is just getting its teeth kicked in, period,” a trader said.

Away from coal, recently topical names stayed on the radar.

A trader said Gymboree Corp.’s 9 1/8% notes due 2018 were “not as active as it has been,” but were still moving around. In Thursday trading, the bonds – which have been attempting to recover ground lost in the wake of dismal earnings released Sept. 11 – once gain reversed direction, giving up the ground it has gained in the last couple of sessions.

The trader placed the issue at 34¼, down 1¾ points.

Another trader pegged the debt around 34.

NII Holdings Inc. was meantime continuing to move higher, as it has been since the company filed for Chapter 11 protections on Monday.

A trader said at least $35 million of the 7 5/8% notes due 2021 were exchanged during the session, rising almost a point to 16 7/8. There was less trading in the 10% notes due 2016, but they were also almost a point better at 24¾.

The 11 3/8% notes due 2019 were steady at 67.

Coal taking hits

Coal companies were weaker Thursday, following a report from Goldman Sachs on Thursday that opined metallurgical coal prices have not yet hit bottom.

If true, that could spell trouble for the sector as it is already dealing with dwindling demand.

Walter Energy Inc.’s bonds “keep getting beat up,” one trader said, seeing the 9½% notes due 2019 trade down to 91 and the 11% notes due 2020 down to 56.

“There’s more melting down on that one,” a trader said.

Arch Coal Inc. was also down, and quite sizably, according to a trader.

“They have been saying they are going to start idling [some operations],” he said.

The trader deemed the 7¼% notes due 2021 down 2½ points at 59¼, noting that the paper had hit an intraday low of 58½.

The 7¼% notes due 2020 ended off “almost a 5-sky,” to 59½ and the 7% notes due 2019 fell a deuce to 62½.

Another trader pegged the 7% notes at 62½, “down a few points.”

In Alpha Natural Resources Inc. debt, one trader saw the 6% notes due 2019 declining 4½ points to 66½. A second trader placed the issue in the high-60s, which was “definitely down a couple points as well.”

Coal stocks weren’t faring too well, either, as Walter’s equity (NYSE: WLT) hit a new 52-week low of $2.94, down 50 cents, or 14.53% on the day. Arch’s stock (NYSE: ACI) ended near its 52-week low, down 15 cents, or 5.36%, to $2.65.

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