RadioShack rises on refinancing deal; Sears slightly better; Walter comes in on takeover rumor

By Stephanie N. Rotondo

Honolulu, Oct. 3 – New employment data out Friday indicated a strengthening economy, helping push most markets into higher territory.

The latest Labor Department report showed 248,000 non-farm jobs being added in September, pushing unemployment down to 5.9%, the first time the marker has hit below 6% since 2008.

While most markets were enjoying the positive tone, some names were also boosted by fresh news.

RadioShack Corp. was “up smartly,” in the words of one trader, after it was reported late Thursday that the company had secured new financing from Standard General LP, its largest shareholder.

But even with the market’s firmer feel, the coal sector failed to gain any traction.

“Coal is definitely still better for sale,” a trader said, even Walter Energy Inc., which had pushed up on Thursday on rumors it was being targeted by BHP Billiton and Rio Tinto.

RadioShack gets some relief

Late Thursday, news outlets reported that cash-strapped RadioShack had inked a deal with Standard General to refinance about $590 million of bank debt ahead of the holiday season.

Come Friday, the Fort Worth, Texas-based electronics retailer’s 6¾% notes due 2019 were “up smartly,” a trader said.

The trader said the bonds were up 7 points from the last round-lot trades on Sept. 26, pegging the debt at 41¾.

Another trader said the name “bounced,” though he noted that there was “not a lot of volume.”

The trader saw the bonds trading “anywhere between 41 and 45.” He remarked that short-covering could have been at least partially responsible for the gains, adding that “there’s lots of CDS in this one.”

Standard General is taking the lead on a refinancing package that will refinance a $535 million asset-backed revolving credit line from GE Capital.

The New York-based hedge fund recently upped its equity stake in RadioShack to 9.8% from 7.08%.

The new credit facility will also see participation from new investors, according to a regulatory filing.

Elsewhere in the retail space, Sears Holdings Corp.’s 6 5/8% notes due 2018 were up slightly – albeit amid few trades – as that company also secured new money recently.

A trader placed the notes at 90 3/8, up nearly half a point.

On Thursday, it was reported that the Hoffman Estates, Ill.-based company was selling a majority of its 51% stake in Sears Canada for as much as $380 million. Of that amount, about $168 million of the shares will be sold to ESL Investments, the hedge fund run by the company’s chief executive officer, Edward Lampert. Fairholme Capital Management LLC is also expected to participate.

Upon completion of the sale, Sears will hold 12 million shares in Sears Canada, down from 52 million shares.

“If you can’t sell it, push it onto shareholders,” wrote Gimme Credit LLC analyst Evan Mann in a comment out Thursday afternoon.

No gains for coal

Walter Energy’s bonds “drifted back in a little bit” Friday, after rallying Thursday on rumors it was a takeover target of BHP and Rio Tinto, a trader said.

The trader said the 11% PIK toggle notes due 2020 fell to a 46 to 47 range, which compared to the previous day’s highs “north of 50.”

A second trader saw both the 8½% notes due 2021 and the 9 7/8% notes due 2020 slipping half a point, to 29½ and 32½, respectively.

Other coal names were also under pressure.

A trader said Arch Coal Inc.’s debt “continued to get smacked,” placing the 7¼% notes due 2021 in a 44 to 45 context.

Another trader said the name was “still down” even as the rest of the market was perking up.

He saw the 7¼% notes falling 1¼ points to 45, while the 7¼% notes due 2020 declined a point to 52½.

The 9 7/8% notes due 2018 were called off 1¼ points at 54¾.

Fannie, Freddie regain ground

A trader said there was “still a lot of focus” on Fannie Mae and Freddie Mac paper on Friday.

The government-sponsored entities have been active this week, after a federal judge dismissed lawsuits from investors that claimed the government’s takeover of most of the agencies’ profits was illegal.

But while the news had initially sent the companies into a tailspin, they managed to recoup some ground during Friday’s session.

“Freddie and Fannie preferred stopped the decline,” a market source reported. “Most Fannie and Freddie issues were up 3% to 8%.”

In early trading, Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) moved up 40 cents, or 10.64%, to $4.16 and Freddie’s fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) put on 46 cents, or 12.07%, to trade at $4.27. The issues gave up some of those gains by day’s end, however, though they still ended the session higher.

The Fannie 8.25% preferreds closed up 14 cents, or 3.72%, to $3.90, while Freddie’s fixed-to-floats ended up 15 cents, or 3.94%, to $3.96.

© 2015 Prospect News.
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