Cengage learning, Global Geophysical remain weak; J.C. Penney debt mixed ahead of posting loss

By Stephanie N. Rotondo

Phoenix, Feb. 27 - The day's notable distressed debt names were on the weaker side, according to traders.

Cengage Learning Acquisitions Inc.'s bonds remained under pressure, following news out Tuesday regarding a potential hiring of restructuring advisors. Global Geophysical Services Inc. also remained soft following its earnings release in the previous session.

However, traders gave mixed reports on J.C. Penney Co. Inc. ahead of the retailer's quarterly report, which came out after Wednesday's close. A trader opined that once the results came out, it could "stir the pot some."

When the numbers were released, they showed a wider-than-expected loss and a massive decline in holiday sales.

Cengage under pressure

Cengage Learning's debt continued to drift downward, as investors mulled news out Tuesday regarding a potential hiring of restructuring advisors.

A trader pegged the leftover 10½% notes due 3015 in the mid-20s and saw the 11½% notes due 2020 at 79 bid, 80 offered.

The Wall Street Journal reported on Tuesday that Cengage Learning has been in talks with restructuring advisor Alvarez & Marsal Holdings LLC.

However, the article noted that the company had yet to officially hire Alvarez or any other turnaround firm.

The Stamford, Conn.-based textbook publisher has struggled of late, as demand for textbooks has declined. The company is also laboring under a fair bit of debt, as well as a looming audit.

For its part, the company has said the audit should not turn up any issues.

Private equity firm Apax Partners Ltd. owns the company, which was formerly known as Thomson Learning. Apax has reportedly been buying up Cengage debt, only adding fuel to the talk that a restructuring is nearing.

Global Geophysical losses continue

Global Geophysical's bonds weakened further in midweek trading, just one day after the company reported disappointing earnings.

A trader saw the 10½% notes due 2017 slipping 2½ points to 771/4. After the results came out on Tuesday, the bonds had lost 5 points on the day.

In its quarterly report, the Houston-based seismic data provider posted a net loss of $28.6 million, or 76 cents per share. There was a $12 million loss from operations.

Revenues were cut in half from the previous year, coming to $55.3 million.

Analysts had been expecting a loss of just 13 cents per share, on revenues of $95.94 million.

The company said several non-recurring charges were included in the quarter's net loss.

J.C. Penney reports big loss

It was a mixed bag for J.C. Penney's debt, as investors awaited results that were scheduled to come out after the market closed.

One trader said the 5.65% notes due 2020 were off fractionally by the end of business, seeing them at 843/4. Another market source called the issue up half a point at 85 bid.

But a third source deemed the debt "pretty much unchanged" at 84½ bid, 85 offered.

The trader said the pending earnings could "stir the pot" come Thursday.

For the fourth quarter, the Plano, Texas-based retailer reported a net loss of $552 million, or $2.51 per share.

That compared to a profit of $294.1 million, or $1.28 per share, the year before.

Excluding one-time charges, net loss was $427 million, or $1.95 per share. Analysts had forecast a loss of 28 cents per share.

Revenues were down 28.4% to $3.8 billion, despite it being a big holiday quarter. Additionally, same-store sales declined by 31.7%.

For the year, the company lost $985 million, or $4.49 per share. Revenues declined by 24.8% to $12.99 billion.

Same-store sales were down 25%.

In early 2011, J.C. Penney had sought to change the way it did business by abandoning sales and coupons and instead offering "everyday low prices." Customers were not pleased with the changes, however, and the company eventually brought back sales and coupons.

Investors were likely looking for indications that the turnaround effort was taking root. In the company's earnings call, Ron Johnson called 2013 a make-or-break year for the company, adding that he expected the new strategy to take hold.

Johnson also opted not to provide any guidance for 2013.

"I don't want to get into the habit of offering forecasts for early quarter results," he said. "I want to stay out of the guidance business. We think we are taking the steps to return to growth."

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