Market ends weak; J.C. Penney rallies on stock sale; Caesars revises debt rates, bonds soften

By Stephanie N. Rotondo

Phoenix, Sept. 27 - Distressed bonds were giving up ground in Friday trading, ahead of month- and quarter-end on Monday.

Investors were also likely attempting to settle in while the federal government debated raising the debt ceiling or not.

Of the day's dealings, a trader said it was "a repeat of yesterday," with J.C. Penney Co. Inc. and Caesars Entertainment Corp. again making headlines.

J.C. Penney bonds were continuing to rally following news out late Thursday regarding a common stock offering. The company is expected to raise over $900 million from the sale, though top executive Myron Ullman was reported to have said there was no need for fresh capital.

For its part, Caesars was trending mostly lower as the company revised price talk on its planned bond and loan offerings. The rate revisions come just one day after the company shuffled the financing around, increasing the first-lien offering and reducing the second-lien and term loan.

J.C. Penney rebound continues

J.C. Penney continued to be a topical name Friday, following Thursday's announcement that the company had commenced a sale of 84 million common shares.

The Plano, Texas-based retailer's debt continued to rebound during the session, after declining Wednesday on the back of an analyst note that stated the company would need to raise cash. On Thursday, Myron Ullman, chief executive, was reported to have said there was no need to raise fresh capital. Then came the news of the stock sale, as well as a lowered liquidity forecast.

A trader on Friday saw the 5.65% notes due 2020 rising almost a deuce to 763/4. However, he said the 7.95% notes due 2017 were unchanged at 88.

The trader also saw the 6 3/8% notes due 2036 at 71, up 2½ points and the 5¾% notes due 2018 at 80, up 2 points.

Another trader placed the 5.65% notes around 77, which compared to levels around 75 on Thursday. The 6 3/8% notes traded up to 71, he said.

Goldman Sachs - the bank that provided a $2.25 billion loan for the company earlier this year and ironically, where the analyst report that initially drove the debt and stock down on Wednesday came from - led the stock sale. The shares were priced at $9.65 per share, a 7.4% discount to Thursday's closing price.

All told, the company could see proceeds of $932 million.

J.C. Penney also said Thursday that liquidity would be around $1.3 billion, excluding proceeds from the stock offering. The company had previously claimed it would have well over $1.5 billion by the end of the year.

Caesars ups rates

Caesars Entertainment's debt was again trading actively on Friday as the company again revised terms of a planned financing effort.

A trader saw the 10% notes due 2018 falling almost a point to 541/4, though he said the 8½% notes due 2020 improved slightly to 931/4.

Another market source deemed the 10% notes down over a point at 54 bid.

As previously reported, Caesars is looking to refinance about $4.4 billion of CMBS debt and the $450 million senior secured credit facility entered into by Octavius Linq Holding Co. LLC, an indirect subsidiary. As such, the company is looking to sell $1.85 billion of senior secured notes.

The deal was said to include a $500 million tranche of seven-year first-lien notes and a $1.35 billion tranche of eight-year second-lien notes. Both tranches come with three years of call protection.

However, on Wednesday the Las Vegas-based casino operator said it was upping the amount of first-lien notes to $1 billion and trimming the second-lien notes sale to $1.15 billion.

The company also said it was reducing a planned bank loan to $2.5 billion from $3 billion.

Come Thursday, Caesars reportedly was increasing the rates on the various debts.

The coupon on the first-lien notes was upped to 8% from a 7¼% to 7½% context originally. The rate on the second-lien notes meantime moved up to 11% from 10¼% to 10½%.

As for the term loan, the interest rate is slated to be Libor plus 6%, versus initial talk of Libor plus 5.5%.

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