Distressed names stay weak amid junk retreat; coal continues to crumble; Toys ‘R’ Us launches loan

By Paul Deckelman

New York, Sept 29 – Distressed-debt names were seen mostly weaker on Monday in the context of a continuing overall retreat in the junk bond market, traders said.

Several traders said that the surprise shakeup at investment giant Pimco – with Friday’s announcement that its longtime superstar fund manager, Bill Gross, had resigned from the company to go to rival Janus Capital amid record outflows – was continuing to weigh on the already unsettled market, as investors try to make some sense of the developments. Others, however, disagreed.

Coal names – recently under pressure in the wake of a negative report on the prospects for the industry’s metallurgical coal segment – mostly continued on the downside, including Arch Coal Inc. Higher-quality rival Peabody Energy Corp.’s debt, on the other hand, was seen firmer.

Also in the natural resources area, traders saw a continued downward drift in rare-earths producer MolyCorp., Inc.’s paper.

And energy exploration and production names, such as Endeavour International Corp. and Quicksilver Resources Inc., continued to lose ground.

Traders saw Toys 'R' Us, Inc.’s bonds remaining easier, even as the specialty retailer launched a $1.375 billion credit facility with a Monday bank meeting.

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