Bonds of Apollo-Backed Claire's Plunge After Earnings Miss

  • The retailer's 9% bonds fall to 71 cents on the dollar
  • The company has struggled to remain profitable since 2007 LBO

Bonds of Claire’s Stores Inc. plummeted after the Apollo Global Management LLC-owned teen-jewelry retailer reported a drop in third-quarter earnings.

The company’s $1.125 billion of 9 percent bonds due 2019 fell about 5 cents Tuesday to about 71 cents on the dollar, tumbling from as high as 99.25 cents in January, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Citigroup Inc. said in a note Tuesday that earnings were below estimates and fell in part because of contracting margins.

Claire’s has been struggling to remain profitable since it was acquired by Leon Black’s Apollo for $3.1 billion at the height of the leveraged-buyout boom in 2007. Standard & Poor’s lowered the retailer’s rating to CCC, or eight levels below investment-grade, in April warning that “declining profitability and cash use will continue to erode the company’s liquidity position."

Charles Zehren, a spokesman for Apollo at Rubenstein Associates, and J. Per Brodin, chief financial officer of Claire’s, didn’t return phone calls and e-mails seeking comment.

Adjusted earnings before interest, taxes, depreciation and amortization fell about 23 percent to $39.2 million in the three months through October, according to a company statement Monday. Citigroup analysts Jenna Giannelli and Joshua Joseph were expecting the retailer to produce $49.6 million of adjusted Ebitda.

Claire’s more junior-ranking debt also signaled deepening distress. The company’s $320 million of 7.75 percent unsecured bonds plunged Tuesday to 20 cents from their last trade at 31.5 cents on Sept. 24, Trace data show.

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