Distressed debt dips with market; J.C. Penney firms post-sales numbers; Claire's notes come in

By Stephanie N. Rotondo

Phoenix, Dec. 4 - The midweek trading session was a weaker one for the distressed debt space.

However, a couple recently topical names managed to buck the day's trend.

J.C. Penney Co. Inc. continued to inch higher, just one day after the struggling retailer said preliminary same-store sales in November improved by over 10%. But the company's stock took a beating.

NII Holdings Inc.'s downward spiral was meantime put on hold as the company's debt gained as much as 4 points on the day. There was no fresh news about the company, but a trader speculated that investors were grabbing at the bonds at the recent lows.

In the coal space, Arch Coal Inc. gave back some of the gains incurred on Tuesday. On Tuesday, the St. Louis-based coal producer announced a refinancing effort that helped give the debt a boost. Come Wednesday, Standard & Poor's downgraded the name and the bonds went south.

J.C. Penney stays strong

A trader saw J.C. Penney's 5.65% notes due 2020 rising over 1½ points on Wednesday to 82.

Another market source pegged the issue at 80½ bid, up just a touch.

Yet another trader said the debt was "a little better" at 81, though he noted that there was not all that much trading.

However, the company's stock (NYSE: JCP) took a decent-sized hit, falling 45 cents, or 4.45%, to $9.66.

On Tuesday, the Plano, Texas-based retailer released preliminary same-store sales figures for November, which included the ever-important Black Friday.

Based on preliminary figures, sales were up 10.1% year over year and online sales continued to be strong.

The company had posted a 0.9% sales increase in October, the company's first sales gain in several years.

Claire's earnings disappoint

Among other retailers, Claire's Stores Inc. put out "disappointing" earnings late Tuesday, a trader said, resulting in a 3 to 5 point dip for the company's bonds.

The trader saw the 7¾% notes due 2020 dropping 4 to 5 points to close in a 95½ to 96 context, while the 8 7/8% notes due 2019 lost about 3 points to finish at 106.

The Chicago-based retailer reported net sales of $356.9 million for the third quarter, a 1.8% decrease from the same period of 2012. Consolidated same-store sales fell 5.2%, with North American sales declining 7.2% and European sales dropping 2%.

Gross profit percentage fell 1.7% to 48.9%.

Cash and equivalents at quarter end were $21.4 million. The company also has $33 million available under a revolving credit facility.

Claire's cash balance dropped $52.4 million during the quarter, due in part to interest payments and capital expenditures.

NII bonds rebound big

NII Holdings' debt got a big bounce in Wednesday trading, though there was no fresh news to act as a catalyst.

One trader said the 7 5/8% notes due 2020 rose 3 points to 41 1/2, while the 10% notes due 2016 increased 2 ½ points to 52.

The 8 7/8% notes due 2019 popped 4 points to close at 42 1/2.

Another trader placed the 7 5/8% notes at "41-ish," which he said was up 3 points. He also saw the 11 3/8% notes due 2019 at 79, which was up 4 points.

"There was no particular news," the second trader said. "It's a name that's been volatile since the numbers [in late October]. Today, somebody decided to come in and buy it."

NII Holdings, also called Nextel International, is a Reston, Va.-based provider of Nextel mobile phone service in Latin America.

Arch Coal softens

Arch Coal gave back some of the gains it had won on Tuesday after announcing a refinancing effort.

The dip came on the back of a downgrade from S&P.

A trader called the 7¾% notes due 2021 off nearly a point at 74½ and the 9 7/8% notes due 2019 dropped a deuce to end at 841/2.

On Tuesday, the coal company said it was seeking amendments to its credit facility, including an addition of $300 million. The company also said it was launching a cash tender offer for its $600 million issue of 8¾% notes due 2016.

Come Wednesday, S&P downgraded the name to B from B+. The rating on the senior notes was meantime lowered to CCC+ from B-.

S&P said the downgrade was based on the fact that the company will have to raise at least some additional funding to completely fund the tender offer.

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