RadioShack bonds dip as financing offers come in; J.C. Penney remains soft; MF Global declines

By Stephanie N. Rotondo

Phoenix, Oct. 3 - It was a downward slope for distressed bonds as a partial government shutdown ended its third day.

Retailers RadioShack Corp. and J.C. Penney Co. Inc. remained under pressure as investors worried about financing issues. For its part, RadioShack was in the news as the company was said to receive new financing offers.

Meanwhile, MF Global Holdings Ltd. saw its debt drop several points during the day's session. The losses came on the back of news out late Wednesday regarding another distribution of customer funds.

In the emerging market space, OGX Petroleo e Gas Participacoes SA bonds were softening and one trader said the company's dollar denominated issues were now trading flat after the company missed a coupon payment on the 2022 maturity earlier in the week.

The company also said on Thursday that its Tubarao Martelo field - its only viable oil source - likely had a third less oil than thought.

RadioShack dips

RadioShack has reportedly received several new financing offers, including one from its current lenders Bank of America Corp. and Wells Fargo & Co., as well as GE Capital.

Traders said the Fort Worth, Texas-based electronics retailer's debt was down on the news.

One trader said the decline could be due to worries that any new debt might be secured, which would put them ahead of the 6¾% notes due 2019. He also said the weakness might be based on concerns about the company's debt capacity and its ongoing liquidity.

The trader said the debt traded just below 70 during Thursday trading.

Another trader pegged the issue at 693/4, off a quarter-point.

RadioShack's bottom line has been under pressure as the store competes to maintain market share amid competition from stores like Best Buy and Amazon.

In August, the company paid off $214 million in debt with cash. That left it with over $200 million in cash and another $400 million available under a secured credit facility due in 2016.

In order to shore up its cash position, RadioShack previously hired Peter J. Soloman Co. to find financing options. The investment firm was said to have stated an Oct. 2 deadline for any offers.

J.C. Penney keeps dropping

J.C. Penney bonds "continue to weaken," a trader said Thursday.

He saw the 7.65% notes due 2016 hitting a low around 82.

Another trader called that issue off 3 points, also around 82, while the 7.95% notes due 2017 drifted down a point to 831/2.

The second trader also saw the 5¾% notes due 2016 dropping almost 2 points to end around 761/4.

Late Tuesday, Reuters reported that a small investor in the company had filed a lawsuit over a recent stock sale that caused the company's shares to drop dramatically.

The investor, Alan Marcus, said management had assured investors that its cash position was fine and that no new capital would be needed, only to turn around and sell as much as $903 million of stock.

The stock was sold at $9.95 per share and news of the offering sent the shares down 13.1%.

"As a result of defendants' false statements, J.C. Penney stock traded at artificially inflated levels," Marcus said in a court filing.

On Wednesday, the company said it was closing all of its outlet stores, which will result in layoffs for about 1,400 employees.

Also on Wednesday, Fitch Ratings said it revised J.C. Penney's issuer default rating to CCC from B-, citing a higher-than-expected cash burn throughout 2013 and concerns that the company will have to mine external sources for more capital in 2014.

MF Global takes beating

MF Global's 6¼% toggle notes due 2016 were "down a few points," according to a trader.

He said the debt fell to around 44, which compared to Wednesday's level closer to 50.

Another trader pegged the notes around 45.

Late Wednesday, it was reported that the trustee assigned to liquidate the futures brokerage run by Jon Corzine was looking to file an allocation plan to pay the last remaining funds back to customers.

"The allocation is obviously what the market did not like or anticipate," the first trader said.

The firm went bust in October 2011 and an investigation into its demise discovered that $1.6 billion of customer funds had gone missing. Since then, the trustee, James Giddens, has worked to track down and pay back the missing funds.

Thus far, about 98% of funds have been returned to customers who traded on U.S. exchanges. Another 74% has been paid out to customers who traded on foreign exchanges.

Giddens' latest allocation plan would bring both distributions up to 100% and, if approved, would be paid out in full by the end of the year.

OGX the big loser

A trader said OGX's notes saw "the biggest downward move" during the trading day, as the 8½% notes due 2018 fell almost 3½ points to 12.

The trader also saw the 8 3/8% notes due 2022 declining over 2 points to close around 133/4.

The trader remarked that both issues were trading flat, or without accrued interest, after the Brazilian oil producer failed to make a $44.5 million coupon on its 2022 maturity.

The missed coupon had been expected by the market.

But the company was in the news again on Thursday, as it said that its Tubarao Martelo oilfield had about 87.9 million barrels of oil product - a figure that was less than a third of what the company had originally forecast.

The area is the company's only producing field.

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