J.C. Penney off as shares swoon on poor numbers; Intelsat busy as swap extended; CGG off

By Paul Deckelman

New York, May 12 – Traders said that things were fairly quiet in the distressed-debt realm on Friday, in line with an overall quieting down in the broader high-yield market following several consecutive busier sessions.

Nonetheless, they said that certain topical names were attracting attention.

J.C. Penney Co. Inc.’s bonds were seen mostly lower as the embattled department store operator’s stock swooned after it reported wider net and earnings per share losses, and falling sales.

That pessimistic tone also pushed sector peer Neiman Marcus Group’s bonds lower on the day.

Elsewhere, Intelsat SA’s various existing bond issues were mixed in active trading, as investors positioned themselves after the communications satellite company again extended its current exchange offer aimed at taking out a big chunk of its more than $15 billion of outstanding debt.

And French geophysical services provider CGG SA’s bonds fell as the company announced that it had skipped a scheduled interest payment.

Penney gets punished

The news that J.C. Penney had posted worse-than expected first quarter financial results and sales figures pushed the troubled Plano, Texas-based department store chain operator’s bonds lower.

A market source saw its 5.65% notes due 2020 finishing at 100½ bid, which he called down 1¼ points. About $18 million of those notes traded.

However, a second trader pegged those same notes down perhaps ¼ point.

Another said that Penney’s bonds “didn’t come down by more than 1 point” even while the company’s New York Stock Exchange-traded shares were getting killed, finishing down 74 cents, or 13.99% at $4.55, their all-time low point.

The shares tumbled and the bonds stumbled after the company reported a first-quarter net loss of $180 million, or 58 cents per share – far wider than the year-ago $68 million, or 22 cents per share. Analysts were only expecting a similar-sized loss versus last year’s this time around.

Penney – in the process of closing 138 of its 1,014 locations nationwide – saw same-store sales drop by 3.5% from year-ago levels during the quarter, while total sales slid by 3.7% to $2.7 billion from $2.8 billion a year ago.

Wall Street was expecting a sales decline of only about 1.4% for the quarter.

Neiman Marcus knocked lower

A trader said that the slide in Penney’s paper was a bad omen for other names in the increasing beleaguered retailing sector.

For instance, he noted that Dallas-based high-end department store operator and catalog retailer Neiman-Marcus Group “was busy today and took a hit,” finishing down around 3 points at 53¾ bid. More than $16 million of those notes changed hands.

Intelsat is mixed

Away from the swamp which retailing has become, traders saw active dealings in the various bonds of Luxembourg-based communications satellite company Intelsat SA on Friday as they digested the news earlier in the week that the company – trying to successfully mount a debt exchange that would cut its more than $15 billion debt load by some $3.6 billion – had again extended the deadline in hopes of bringing more investors on board.

That offer will now close at 5 p.m. on Monday (May 15).

Successful completion of the exchange offer is considered vital to Intelsat’s plans to merge with OneWeb and to obtain a $1.7 billion investment from Japanese communications conglomerate Softbank.

In Friday’s dealings, Intelsat’s 7¼% notes due 2020 lost 5/8 point, ending at 93 7/8 on volume of over $19 million.

However, its 5½% notes due 2023 jumped by 2 1/8 points on the day to finish at 85 1/8 bid, with more than $18 million traded.

Its 8 1/8% notes due 2023 eased by ½ point, finishing at 53 bid on $16 million of turnover.

CGG bonds drop

A trader said that one of the big losers of the day was CGG SA, whose 6½% notes due 2021 were down 1½ points on the session, closing at 43½ bid.

The downturn came amid the news that the Paris-based provider of seismic analysis and other geophysical services to the energy industry – currently in the midst of trying to negotiate better terms with its bondholders – has elected not to make a $12.4 million interest payment due May 15 on its 5 7/8% senior notes due 2020.

The company said in a statement that it has enough cash on hand to make the payment but it will instead use the 30-day grace period. CGG said it believes that it has sufficient liquidity to continue meeting all of its obligations during the grace period.

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