Midday Commentary: J.C. Penney's junk bonds remain active amid public board battle

By Paul Deckelman

New York, Aug. 12 - There was brisk activity in J.C. Penney & Co.'s bonds on Monday morning amid new developments in the troubled Plano, Texas-based retailer's increasingly soap opera-like saga.

Penney's most liquid issue - its 5.65% notes due 2020 - was among the most actively traded junk credits in morning dealings, with more than $6 million having changed hands in round-lot trading at mid-morning, on top of a number of smaller odd-lot transactions. The bonds were holding in a narrow range around 69¾ bid, down slightly from levels around 70 seen on Friday.

That renewed activity in Penney paper comes amid public disclosure of what is shaping up to be an ugly boardroom brawl between 18% owner William Ackman - Penney's largest single shareholder - and the rest of the company's board of directors.

Ackman had reportedly been the force behind the replacement of then-chief executive officer Mike Ullman by former Apple Inc. executive Ron Johnson, whose efforts to turn the company around were considered to have only made its problems worse; Johnson was ousted earlier this year, with Ullman returning to the top spot.

An unhappy Ackman has recently been going public with his complaints about how the company is being run, urging the replacement of interim chief Ullman; other board members were reportedly miffed that the company's dirty laundry was being washed in public, with news accounts saying they were considering taking action against Ackman.

Even an ostensible non-combatant in the Penney Wars - Starbucks chief executive Howard Schultz - has entered the fray, releasing a statement defending Ullman, who also sits on Starbucks' board, and criticizing Ackman's actions.

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