J.C. Penney pops on Goldman loan news; Kodak gives assets to U.K. retirees; Caesars debt firms

By Stephanie N. Rotondo

Phoenix, April 29 - The distressed debt market got off to a strong start on Monday.

Among the day's notable names was J.C. Penney Co. Inc. The company announced Monday that it had secured a $1.75 billion loan from Goldman Sachs, which followed previous reports of investments from George Soros and two other unnamed hedge funds. But the loan in particular was making waves, as one of the company's issues states that debt cannot be layered on top of it - making it likely the issue will either be amended or called in the near future.

Eastman Kodak Co. was also notable as the bankrupt photo imaging company said it would hand over two of its business to its U.K. pensioners. The second-lien "stubs" jumped 20 points on the news, while the subordinated bonds put on at least 7 points.

Meanwhile, Caesars Entertainment Corp.'s debt was on the busy side. The bonds were also trending higher ahead of the company's earnings release on Wednesday.

And, after getting walloped last week, Exide Technologies Inc. paper experienced a small rebound to kick-start the week.

J.C. Penney pops

J.C. Penney got a boost Monday as the company said it had inked a deal with Goldman Sachs for a $1.75 billion loan.

But part of what made the news so notable was how said loan would impact the company's 7 1/8% notes due 2023.

"It's the only deal that has language that says they can't layer debt on top of it," a trader said. As such, the company said in its loan agreement that it might use loan proceeds to "discharge" the bonds.

The company said it might also seek an amendment on the issue.

Whatever the company plans to do, the 7 1/8% notes jumped a hefty 30-plus points.

The first trader saw the issue hitting a high of 140 on Monday, ending in a 134¾ to 135 context. That compared to levels around 102 on Friday.

Another trader placed the issue in the mid-130s.

The Plano, Texas-based retailer's other issues were also firming, though not nearly as much as the 7 1/8% notes.

The first trader said the other bonds were "up in sympathy," seeing the 5.65% notes due 2020 at 85 7/8, up nearly 2½ points. The 7.65% notes due 2013 rose 3 points to 991/2, while the 5¾% notes due 2018 gained 1¾ points, closing around 901/4.

The second trader placed the 6 3/8% notes due 2036 around 80 and the 7.4% notes due 2037 around 84.

Not everyone was excited to learn that J.C. Penney had acquired additional cash, however.

In an afternoon report published Monday, Gimme Credit LLC analyst Carol Levenson noted that the company's management recently said its available $850 million in credit would be sufficient to cover its expenses. Then along comes the Goldman loan, which is said to be funding current needs. Levenson points out that "it would be nice to know" what the company's needs actually are.

Levenson also noted that the company's debt has doubled in the last two weeks.

"Oh and P.S. bear in mind that none of this would have been necessary if Penney had not embarked upon its great visionary transformation and lost 25% of its sales. The credit quality damage is nearly all self inflicted," she wrote.

Kodak debt rises

Eastman Kodak's second-lien "stubs" jumped up 20 points following news the bankrupt company was planning to hand over two of its units to pensioners of its U.K. pension plan.

One trader placed the stub notes in the high-80s, another saw the paper ending around 90. The latter said that was up from the mid-60s.

The first trader also saw the unsecured debt - the 7% notes due 2017 and the 7¼% notes due 2013 - rising to the low-20s from previous levels around 14.

The second trader pegged those issue around 20, up from 13.

The transfer of assets will allow Rochester, N.Y.-based Kodak to emerge from bankruptcy. The U.K. pension plan had previously said that it was owed $2.8 billion by the company, which threatened to be a huge obstacle to exiting Chapter 11 protections.

Under the plan, Kodak will hand over its personalized and document imaging units. The pension plan will also receive about $325 million in cash and claims for about another $325 million.

The bankruptcy court overseeing Kodak's case still needs to approve of the deal.

Caesars up ahead of earnings

Caesars Entertainment is slated to release earnings at midweek and its bonds were trading up slightly ahead of the numbers.

A trader called the 6 3/8% notes due 2036 up almost half a point at 80 1/8, as the 10% notes due 2018 moved up half a point to 613/4.

Analysts are expecting a loss of $1.59 per share, according to an earnings preview put out by Forbes. That compares to a net loss of $2.24 per share for the same period of 2012.

Caesars is a Las Vegas-based casino and hotel operator.

Exide recovers some ground

Milton, Ga.-based battery maker Exide Technologies took a good beating last week, spurred by news of a battery recycling plant shut down by state environmental regulators.

But the overall firmness of the day helped the paper rebound some come Monday.

One trader called the 8 7/8% notes due 2018 a point higher from Friday, ending at 671/4. Another trader quoted the issue at 67 bid, 68 offered, up from 65 bid, 66 offered.

Ambac exit approved

A trader said Ambac Financial Group Inc.'s bonds were up 2 to 3 points as a bankruptcy judge approved its settlement with the Internal Revenue Service, which will allow the company to exit bankruptcy.

The bonds - most of which trade on top of one another - closed around 72, according to the trader.

The New York-based bond insurer hopes to emerge from bankruptcy by May 1.

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