Global Geophysical files bankruptcy, bonds trading flat; Toys 'R' Us swings to loss, debt dips

By Stephanie N. Rotondo

Phoenix, March 26 - Distressed issues were much more active Wednesday, driven by a round of fresh credit-specific news.

First up, Global Geophysical Services Inc. announced it had filed for bankruptcy late Tuesday. Come Wednesday, the company's bonds were moving up from Tuesday's lows, but had begun trading flat, or without accrued interest.

Meanwhile, Toys 'R' Us Corp. was deemed the day's "big loser" by one trader after the company reported a loss for its fiscal fourth quarter.

The company had reported a profit a year earlier.

Caesars Entertainment Corp. paper was then boosted by news that a group of noteholders was fighting to stop a property transfer deal that was announced earlier this month. The group is alleging fraudulent transfer and breach of fiduciary duties.

And, Energy Future Holdings Corp. was "fairly active," according to a trader, as it was reported that the company's secured lenders had rejoined talks to get a restructuring plan together. The lenders had previously exited talks in October.

Chatter is that the company could be filing for bankruptcy as soon as this weekend.

Global Geophysical files

Global Geophysical announced that it had filed for Chapter 11 protection late Tuesday.

Ahead of the filing, bond traders had seen the company's 10½% notes due 2017 dropping 7 to 8 points. Come Wednesday, the debt regained some of that ground, though the bonds had begun trading flat, or without accrued interest.

One trader called the debt up 3½ points around 54. Another trader said the issue was the "bond du jour," calling the notes "up a few" around 53.

A third trader said the bonds were initially quoted lower, "then they kind of worked their way back up to a 53-54 type area."

The company's 11.5% series A cumulative preferreds (NYSE: GGSPA) were meantime weakening on the news.

The shares were down 54 cents, or 11.02%, at $4.36.

A trader noted that the issue priced Dec. 6 at a discounted price of $23 per share.

In court documents, the company said it was lining up about $60 million of debtor-in-possession financing. The company also noted that it had a large backlog and that demand for its services was increasing.

Global Geophysical's common stock will be delisted from the New York Stock Exchange on Thursday. It will begin trading on the Pink Sheets under the ticker symbol "GEGPQ."

Last week, the Houston-based provider of geoscience solutions to the oil and gas industry said that it would have to restate earnings for 2012, 2011, 2010 and 2009, along with the first three quarters of 2013.

The company said the figures should "no longer be relied upon because of accounting errors resulting from material weaknesses in the company's internal controls."

As such, the company noted that it was delaying filing its latest 10-K.

In addition to the restatement news, the company also said that due to its increasing debt burden, it had retained financial advisors to look over its options, while also securing a forbearance from its senior secured lenders.

On that news, S&P dropped its rating on Global Geophysical to CCC- from CCC+ and Moody's followed suit, cutting its rating on the company to Caa2 from B3.

On Wednesday, Moody's further lowered its rating on the company to Ca from Caa2.

Toys 'R' Us softens

Toys 'R' Us swung to a loss in its fiscal fourth quarter, putting pressure on the company's debt.

One trader said the 10 3/8% notes due 2017 were the day's "big loser," as the debt fell over 3 points to 861/2. Another trader said the issue was off a deuce around 87.

Another market source pegged the 7 3/8% notes due 2018 at 82¾ bid, down 2½ points.

During the quarter ended Feb. 1 that included the ever-important holiday selling season, same-store sales dropped 4.1% domestically and 2.2% internationally.

Net sales were down 8.7% to $5.27 billion.

Net loss was $210 million, which compared to a net profit of $239 million the year before. The company said the loss was due in part to a $378 million goodwill impairment charge and a $296 million decline in gross margin dollars, which included a $52 million domestic inventory writedown.

Gross margin fell to 31.8% from 34.1%.

On the positive side, income tax expense fell to $12 million from $212 million. The company also noted that it cut its long-term debt by $322 million in 2013 and that it had amended its $1.85 billion secured revolver to extend the maturity date to 2019.

TXU lenders rejoin talks

Energy Future Holdings' secured lenders - including Apollo Global Management LLC, Oaktree Capital Group LLC and Centerbridge Capital Partners LLC - have reportedly rejoined restructuring negotiations aimed at making a bankruptcy proceeding go smoother.

The lenders had exited the talks back in October and have come back just as the market is expecting a bankruptcy filing.

The company's 15% notes due 2021 - linked to Texas Competitive Electric Holdings Co. LLC, an unregulated subsidiary - "continues to weaken" ahead of the looming filing, a trader said. He saw the issue trading around 181/2.

However, the 10% notes due 2020 were up a touch at 1051/4, he said.

Another trader said the 10% notes were "pretty much unchanged, but they trade above par anyway." The 11¼% notes due 2017 were slightly better, trading in a 67½ to 68½ context, versus 66 to 67 on Tuesday.

A third trader saw the 15% notes falling nearly half a point to 18 3/8.

Though the name has certainly been topical since late last year when the market wondered if the company would make a coupon payment or file for bankruptcy - it made the payment - trading in the debt has not been as volatile as one might expect. One trade speculated that was because investors might be restricted from trading if they are participating in the negotiations, "plus the larger bets have been made."

Caesars mixed

A group of Caesars Entertainment Operating Co. noteholders is looking to stop a previously announced property transfer, calling the move fraudulent and a breach of fiduciary duties.

On the news, the 10% notes due 2018 "bounced" 2½ points to end up around 44½ on "heavy volume," according to one trader. Another placed the issue in a "44 to 45-ish" range.

A third source saw the notes at 44 bid, up a deuce.

Earlier this month, Las Vegas-based Caesars announced that it was selling $2.2 billion of assets to Caesars Growth Partners, a venture 58% owned by the parent company. Caesars Acquisition Co. holds the remainder and is tasked with the goal of maximizing growth opportunities.

But the sale would remove the assets from the operating company, which is highly leveraged.

American Apparel pops

A trader said American Apparel Inc.'s 13% notes due 2020 were not all that active but still up about 9 points post-news of a common stock sale.

He pegged the bonds around 89, which compared to the last print around 80, he said.

On Tuesday, the Los Angeles-based clothing manufacturer announced plans to sell $30.5 million of stock in a public offering. The deal then priced at 50 cents per share on Wednesday.

The price equaled a 15.25% discount to Tuesday's closing share price of 59 cents.

Roth Capital Partners is the bookrunning manager.

Settlement is expected March 31.

Proceeds will be used for working capital and general corporate purposes, including the April cash interest payment on the company's senior secured notes.

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