Dex One's PIK notes gain steam; J.C. Penney debt quiet, mixed on earnings; broad market holds

By Stephanie N. Rotondo

Phoenix, May 17 - The distressed debt market was unchanged to slightly firm on Friday, though overall activity was thin, a trader lamented.

Dex One Corp.'s 12% PIK notes due 2017 continued to be strong, a trader reported. The trader attributed the recent gains to comments made last week at an investment conference regarding the company's equity potential.

Meanwhile, J.C. Penney Co. Inc. was mixed and quiet on the back of its late-day earnings release on Thursday. The company reported a larger-than-expected loss for the first quarter.

Dex gains momentum

A trader said Dex One's 12% PIK notes due 2017 were "going crazy" in Friday trading.

He pegged the issue around 65.

The trader said the recent gains in the name might be due to comments made last week by Hayman Capital's Kyle Bass at the Ira Sohn Conference. In Bass' view, Dex Media - the new entity created by a recent merger of Dex One and SuperMedia Inc. - could see its stock value increase by as much as 300%.

"If that happens, then the bonds are money good," the trader said.

Penney unfazed by earnings

J.C. Penney debt was mixed Friday following the Thursday release of the company's first-quarter results.

One market source saw the 5 ¾% notes due 2018 falling to 92½ from 93, while the 7.4% notes due 2037 held in around 89.

Another source deemed the 5.65% notes due 2020 up half a point at 90 bid.

The quarterly results showed a wider-than-expected loss, with the company posting a net loss of $348 million, or $1.58 per share.

Various analyst polls had placed the loss somewhere between 43 cents per share and $1.06 per share.

Revenue fall 16.4% to $2.64 billion and same-store sales dropped $16.6%.

The first quarter results came just about a month after the struggling Plano, Texas-based replaced Ron Johnson as chief executive with his predecessor, Mike Ullman. Johnson was ousted as his turnaround effort failed to do much but burn through cash.

Broad market bits

Elsewhere in the distressed space, a trader saw Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 slipping "about half a point" to 79 5/8.

Edison Mission Energy's debt meantime was holding in at 60½ and ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 continued to trade around 1.

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