Guitar Center, Walter down following results; Concordia, iHeart fall; Neiman stagnant

By Colin Hanner

Chicago, March 16 – Activity in the distressed market was to the downside nearly across the board on Thursday, traders said, as earnings and other company-driven news brought prices down by several points in some cases.

“The market was pretty hot today,” a trader said, referring to the heavy level of trading even though most of it was in a negative direction.

Perhaps taking the biggest hit of the day was Guitar Center Inc., which saw a several-point loss in one of its bonds, though the reasons for the downfall were not entirely in clear view.

“[Guitar Center] numbers are private, but their earnings were out and they must’ve been weak,” a trader said.

In a similar sinking boat, Walter Investment Management Corp. continued to feel the effects of poor fourth-quarter results several sessions after the residential mortgage company announced them.

“That stuff has really gotten hammered,” a trader said.

iHeartMedia, Inc.’s subsidiary, iHeartCommunications, Inc., traded off following the announcement earlier in the week of private exchange offers for five series of notes, as well as for the company’s term loan D and E facilities, in connection with a proposed debt restructuring.

“Pretty much everything was down a few points, some a little more than others,” another trader said of iHeartCommunications’ movement.

Pharmaceutical companies Valeant Pharmaceuticals International Inc. and Concordia International Corp. continued to fall while oil and related exploration and production companies were nearly unchanged on the session, as was previously red-hot retailer Neiman Marcus Group, Inc.

Offbeat Guitar Center

Speculation supplanted earnings announcements and investor calls for Guitar Center on Thursday, as the private musical instrument retailer did not have to publicly divulge its financial progress.

Nonetheless, sentiment around the company’s debt turned sour after the results, a trader said.

Its 6½% notes due 2019 took a “big hit” and were down 6 points to 85½, one trader said. Another trader said the company landed around an 86 handle.

Though results were not made public for Guitar Center, in its industry sector generally advance figures for the estimated change in monthly sales for sporting goods, hobby, book and music stores were down 0.5% in February compared to a month prior and down 3.6% from the same time last year, the U.S. Census Bureau reported on Wednesday.

Down goes Walter

The suffering continues for Tampa, Fla.-based Walter Investment Management, which saw devastating plunges in both its bonds and stock two sessions after it announced a $22.2 million loss in the quarter.

“They got beat up pretty good,” on the day, a trader said.

Its 7 7/8% notes due 2021 were the biggest decliners of the day, traders said, with one quoting the bonds as down 4¾ points to 64¼ on a “handful of trades.”

Another trader said the paper traded down 5 points into the low-to-mid 60s and got as low as 61 during intraday trading.

The company’s NYSE-traded stock was off 35 cents, or 22.58%, to $1.20 on the session.

iHeart dragging

Two rating agencies responded to iHeartCommunications, Inc.’s private exchange offer on Wednesday and Thursday, and its outlook prompted several bonds to post losses on the day.

“iHeart was softer today after exchange proposal yesterday,” a trader said.

Its 11¼% notes due 2021 were down 1¾ points to 79.

The 9% notes due 2022 were down 3¼ points to 75, while the 9% notes due 2019 were down 3 points to an 83½ level.

Rounding out activity were the 14% notes due 2021, which were down 1½ points to 34.

Fitch Ratings downgraded iHeartCommunications, Inc.’s long-term issuer default rating to C from CC, which follows the media company’s announcement that it hopes to restructure around $14.6 billion in debt, including its senior notes due 2021.

Noting its high debt load, coupled with its high leverage, S&P downgraded the corporate credit rating on iHeartCommunications and its parent company, iHeartMedia Inc., on Wednesday to CC from CCC after the company announced the private exchange offer.

The offer at hand will exchange the notes and loans for longer-dated debt but may also be exchanged for stock and warrants or contingent value rights, S&P noted.

Under all but one scenario, there would be a reduction in the principal amount of debt outstanding and an extension of the debt maturity by two years for exchanged debt, the agency said.

In pharma

After announcing dismal fourth quarter results on Wednesday, the bleeding hasn’t subsided for Concordia International.

Its 9% notes due 2022 were down “almost 4 points” to 73 1/8, a trader said, while its 9½% notes due 2022 were down 3¼ points to 26¼.

On Wednesday, Concordia announced consolidated revenue of $170.4 million for the quarter, a decrease of 8.1% from the previous quarter, according to a news release. It did not offer guidance for 2017, and chief financial officer, Edward Borkowski, said refinancing, restructuring, asset sales or other ways of obtaining capital were not off the table going forward.

For Valeant Pharmaceuticals, the damage was less apparent after an up-and-down week.

Its 6 1/8% notes due 2025 were down 7/8 point to 74½.

Distressed wrap

As oil was about unchanged Thursday – West Texas Intermediate crude for April delivery was down 11 cents to $48.75 – its related distressed companies in the E&P sphere rebounded.

California Resources Corp.’s 8% notes due 2022 were up 1½ points to 81 and Candian oil sands producer MEG Energy Corp.’s 7% notes due 2024 were up similarly with a 1½-point gain to 89, a market source said.

Capitalizing on reports that it might be the latest retailer to be acquired by Hudson’s Bay Co., Neiman Marcus Group Inc. saw quieter movement compared to the past two sessions.

Its 8% notes due 2021 were unchanged at 59½, while its 8¾% notes due 2021 were also unchanged at 55 1/8, a trader said.

Franklin, Tenn.-based hospital operator Community Health Systems, Inc.’s 6 7/8% notes due 2022 were unchanged at 85¾.

Satellite telecommunications company Intelsat Jackson Holdings SA’s 5½% notes due 2023 were unchanged at 84 on a “half-dozen trades,” a trader said.

And Montreal-based Resolute Forest Products Co.’s 5 7/8% notes due 2023 were up ¾ point to 88.

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