J.C. Penney debt loses ground; energy sector busy, but mixed; Clear Channel bonds drift lower

By Stephanie N. Rotondo and Sara Rosenberg

Phoenix, July 12 - The distressed debt market ended the day mixed on Thursday, as investors focused their attention elsewhere, according to traders.

Of the day's distressed dealings, J.C. Penney Co. Inc.'s dent "got beat up pretty bad," according to a trader. There was no fresh news out on Thursday, though the company did receive a downgrade earlier in the week.

Meanwhile, energy related names like Edison International Inc., ATP Oil & Gas Corp and Patriot Coal Corp. were trading busily. However, the sector as a whole was following the day's trend, finishing mixed on the day.

"It was mostly the Supervalu show," one distressed trader said, referring to Supervalu Inc., the grocery store operator, which released earnings Thursday and also discussed its strategic alternatives as it looks to improve its balance sheet.

J.C. Penney bonds dip

J.C. Penney's bonds fell at least a point on the day, according to a trader.

"They got beat up pretty bad," he said, seeing the 6 3/8% notes due 2036 falling 1½ points to 73.

The 7.95% notes due 2017 lost a point to 96.

On Wednesday, Standard & Poor's dropped its rating on the retailer for the third time this year. S&P lowered the company's corporate rating to B+ from BB-.

The alterations follow similar downgrades done in March and May.

The rating agency cited J.C. Penney's new pricing strategy for its decision to change the company's grade. Earlier this year, the company said it was eliminating all coupons and most sales, which then resulted in a drop of 18.9% for same-store sales drop in the fiscal first quarter.

S&P further opined that the next year would be a difficult one as customers get use to the new plan. In the meantime, those customers could instead elect to shop elsewhere.

Energy names active, mixed

Energy names were busy Thursday and trending in line with the general market.

Edison International's bonds were higher on the day, the 7¾% notes due 2016 up "almost 1 [point]" to 57, a trader said.

The 7.2% notes due 2017 were up almost half a point at 561/4.

ATP Oil & Gas' 11 7/8% notes due 2015 meantime lost a point to close around 431/4.

And, the recently notable Patriot Coal 8¼% notes due 2018 were seen firmer around 41 by one trader.

Another trader called the issue "a tiny bit stronger" around 40.

A convertible bond trader noted that the name was "certainly one to look at," seeing the 3¼% convertible notes due 2013 "up again" at 10 bid, 10¼ offered.

"I'm not too sure why they are up," he said. "Their Chapter 11 filing was highly anticipated. I wouldn't be surprised if guys are short these in the 30s and 40s.

"Their balance sheet is not attractive," he added.

Clear Channel slips

A trader said Clear Channel Communications Inc.'s debt was weaker, though there was no fresh news out on the San Antonio-based multimedia company to push the paper down.

He pegged the 11% notes due 2016 at 611/2, down a point. The 10¾% notes due 2016 were likewise down a point at 63.

Cengage loan falls

Cengage Learning Acquisitions Inc.'s term loans headed lower in trading as the company came out with preliminary estimated results for the fiscal fourth quarter late in the prior session, according to a trader.

The extended term loan was quoted at 87 bid, 88 offered, down from 88½ bid, 89 offered, and the non-extended term loan was quoted at 92¾ bid, 93¾ offered, down from 93½ bid, 94 offered, the trader said.

Revenue for the quarter is estimated to be between $499 million and $505 million, compared to $473 million for the same period in the prior year.

Adjusted EBITDA for the quarter is estimated at $187 million to $193 million, versus $202 million in the fiscal 2011 fourth quarter.

The company plans to hold a conference call in early August to discuss its results.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Tribune rises again

Tribune Co.'s loans were once again higher in the secondary market as investors are still reacting to news that the judge on its bankruptcy case will have a final opinion by Friday on the reorganization plan, according to a trader.

The Chicago-based media company's term loan B was quoted at 68¾ bid, 69½ offered, up from 68¼ bid, 69¼ offered, the incremental loan and term loan X were quoted at 67¾ bid, 68¾ offered, up from 67¼ bid, 68¼ offered, and the revolver was quoted at 73 bid, 75 offered, up from 72½ bid, 74½ offered, the trader said.

Under the plan, the company would transfer its broadcast licenses to a new ownership group that includes senior creditors Oaktree Capital Management, Angelo, Gordon & Co. and JPMorgan Chase.

Tribune hopes that it will be able to emerge from Chapter 11 by the end of the year.

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