NII debt rebounds on asset sale news; RadioShack up ahead of earnings; Fannie, Freddie mixed

By Stephanie N. Rotondo

Phoenix, Aug. 18 – NII Holdings Inc. continued to be actively traded in the otherwise muted distressed debt space, traders reported Monday.

The company’s debt began to trade – and fall – heavily last week after the company announced weak quarterly results and warned that a bankruptcy was imminent. Come Monday, however, the bonds were rebounding. One trader attributed the gains to a “dead cat bounce,” but there was news out regarding the Reston, Va.-based provider of Nextel mobile services in Latin America and Mexico.

NII Holdings said Monday that it was selling its Chilean subsidiary to a joint venture that includes Grupo Veintitres, an Argentine media company; Optimum Advisors, a U.S. private-equity firm; and ISM Capital, a London-based investment firm that focuses on emerging markets.

The company did not say how much it would receive for the asset and also noted that it is continuing talks with bondholders regarding a restructuring.

Regardless of what was causing the bonds to rally, they were definitely trading higher on “tons of trading,” according to one trader.

The trader said the 10% notes due 2016 were up the most, putting on over 8 points to close at 27 3/8. The 7 7/8% notes due 2019 earned 4 points to 70, while the 11 3/8% notes due 2019 gained 3 ½ points to close around 70¼.

The 7 5/8% notes due 2021 were up only slightly to 16½, he said.

Another trader said the 11 3/8% notes were the most actively traded issue, with about $35 million of debt changing hands. The trader deemed the issue up 4½ points to 71.

The 7 7/8% notes were the second-most active, trading at least $30 million. That paper was seen rising 4 points to 70.

In the 10% notes, $25 million traded, the trader said, and gained 7½ points to 26½. The 7 5/8% notes improved by 1½ points, ending at 17¾ on about $15 million traded.

“Those were by far the largest volume guys of the day – when you do a search on all the bonds, the top four, volume-wise, are those four issues,” the trader said.

The bonds have been trading flat, or without accrued interest, according to one trader.

RadioShack earnings on deck

RadioShack Corp. expected to release earnings Monday, though the results were not available by 5 p.m. ET.

Still, the numbers were not expected to be good. Analysts are expecting quarterly revenues of $735.9 million and net loss to be 66 cents per share.

Even as the market was predicting another weak quarter, however, a trader said the 6¾% notes due 2019 were moving up.

He deemed the debt up 2½ points to 40.

The Fort Worth, Texas-based electronics retailer has tried to regain market share and turn itself around by shuttering underperforming stores and revitalizing its image. But the effort hasn’t seemed to take hold and analysts from Moody’s Investors Service to UBS AG have said that the attempt will likely fail.

For its part, Moody’s is predicting that the company will run out of cash by the end of 2015.

Fannie adjusts outlook

A trader said there was news out regarding Fannie Mae and Freddie Mac, but that the agencies’ preferreds were “not moving around much.”

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) closed up 8 cents to $11.35, while Freddie’s 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) fell 3 cents to $11.84. Liquidity in either issue was limited, as it was in the rest of the overall preferred space.

On Monday, Fannie reduced its housing market outlook for 2014 and 2015, noting that inclement weather combined with consumer “conservatism” had already pressured the space during the first half of 2014.

The agency also noted that it did not expect 2015 to be the “breakout year” that many are hoping for, though it is probable that it will be better than 2014 or 2013.

However, Fannie’s outlook was at odds with the latest reading of the National Association of Homebuilders/Wells Fargo Housing Market index, which increased in August to 55 from 53 in July. The rise was the third straight gain the index has seen.

Analysts polled by Reuters had been expecting the index to hold at 53.

But that hasn’t been the only news for Fannie and Freddie. On Friday, it was reported that Pershing Square had thrown its hat into the litigation ring, suing the government for its takeover of both companies’ profits. Pershing isn’t the only one to contest the amended bailout agreement – at least 20 other investor-lawsuits are pending, all aimed at similar issues relating to the 2012 change that required Fannie and Freddie to hand over a bulk of their quarterly profits as dividends.

However, Pershing’s lawsuit focuses on common stock investors, while most of the other suits are aimed at aiding the preferred stockholders.

Paul Deckelman contributed to this article

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