Distressed market subdued ahead of holiday; J.C. Penney slips as analyst forecasts bankruptcy

By Stephanie N. Rotondo

Phoenix, March 26 - It was "another one of those days," a distressed debt trader said, as the holiday week - combined with spring break - dealt the market yet another low volume day.

J.C. Penney Co. Inc.'s debt "continued to dip," according to a trader. Late Monday, news outlets cited an analyst's report that speculated a bankruptcy was in the offing.

Among other consumer-linked sectors, casino operator Caesars Entertainment Corp. was on the rise, though there was no fresh news out on the company.

J.C. Penney dips

Late Monday, news outlets were reporting that BMO Nesbitt Burns analyst Wayne Hood was predicting a bankruptcy filing for Plano, Texas-based retailer J.C. Penney.

Come Tuesday, the company's bonds were on the decline.

One trader called the 7 1/8% notes due 2023 down nearly a point at 943/4. Another trader quoted the issue at 94½ bid, 95 offered.

In a research report published Monday, Hood downgraded the company to underperform, stating that there were four paths he envisioned - three of which were not good.

The most optimistic scenario would require the struggling retailer to regain its lost market share and to stop burning through cash. If that could be achieved, he wrote, then there remains a chance for a successful turnaround.

A less-optimistic route would be that the company would experience more modest sales increases, but losses would mount over the next five years.

Both the final two scenarios involve a bankruptcy filing in the next year, either voluntarily or forced.

Caesars puts on a couple

A trader said Caesars Entertainment's 10% notes due 2018 were among the day's busiest securities, with at least $10 million of the bonds trading.

He called the issue up almost half a point at 68 5/8.

He also saw the 5¾% notes due 2017 jump 2½ points to 671/2, though he noted that the gain was "just on a single trade."

There was no fresh news out on the Las Vegas-based casino operator.

Suntech still volatile

A trader said that Suntech Holdings Co. Ltd.'s 3% convertible notes that were to have matured on March 15 remained the most active issue in the world of convertibles.

"There's really good volume in it," he said.

A few hours before the market closed, the trader saw the issue trading in a 28-28½ context, about in line with where it had gone out on Monday. But by the end of the day, the issue had risen to 29 bid, 29¼ offered.

"It's all guess work," the trader said of the price volatility, given that it is unclear how things will shake out now that the company is in bankruptcy.

The stock (NYSE: STP) has also been volatile and busy. At Tuesday's close, the equity had dropped a penny, or 2.22%, to 44 cents.

The Chinese solar company filed for bankruptcy on Wednesday. Eight of the company's Chinese lenders were behind the filing, as they had sought court approval the previous Monday to deem the main operating subsidiary insolvent.

Suntech had also failed to pay off the convertible notes on March 15. The missed payment was deemed a default and therefore triggered defaults on other outstanding debt.

ATP, Edison firm up

In other distressed names, a trader saw ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 rallying to 7½ bid, 8 offered.

The trader also noted that there were "strong buyers" of Edison Mission Energy's bonds, which he pegged around 533/4.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.