J.C. Penney notes down after Q4 report; Community Health down on prospect of further closures

By James McCandless

San Antonio, March 2 – Traders reported another slow day of trading in the distressed debt market, attributing the lower volume to the most recent negative swing in equity markets.

Notes in J. C. Penney Co., Inc. dropped after the company announced disappointing Q4 numbers Friday along with layoffs of about 360 employees.

Community Health Systems, Inc. issues closed the week as some of the most active. During a Tuesday call with shareholders to discuss Q4 earnings, chief executive officer Wayne Smith predicted further hospital closures for the year.

After reporting Q4 numbers on Tuesday, Frontier Communications Corp. paper retained a spot among the most traded of the session. The company also announced that it was rescinding its dividend.

Another perennial telecom name taking up volume was Intelsat SA. Its notes were bolstered this week by positive comments about changes to the country’s 5G network. Mallinckrodt plc and Revlon, Inc. filled out much of the day’s volume.

J.C. Penney reports

Bonds in Plano, Texas-based department store chain J.C. Penney were active as the company announced Q4 numbers on Friday, a market source confirmed. It reported fourth quarter earnings of $254 million while announcing about 360 layoffs at multiple levels of the company, which one trader described as a positive sign.

“They seem to be doing their best to turn things around,” a trader said. “Apparently there was a lot of stuff on that call that gave investors some confidence. But their growth guidance is something to be concerned about.”

The 7.4% bonds due 2037 lost about 3¾ points to close at just below 68 bid.

Community Health active again

Franklin, Tenn.-based hospital operator Community Health Systems’ notes closed the week active, traders said, after negative news stemming from its Tuesday Q4 report. A $2 billion net loss was recorded for the fourth quarter of 2017, as CEO Wayne Smith warned shareholders that more hospital closures were to be expected by the end of the year.

The 7 1/8% notes due 2020 fell 1¼ points to close at 79¾ bid. The 6 7/8% notes due 2022 shaved off about 2 points to close at about 61½ bid.

Frontier finishes week active

Market sources described paper as active but mixed for Norwalk, Conn.-based wireline telecom name Frontier Communications, which has been the case since the company issued its Q4 report on Tuesday The company announced that it would no longer be issuing a quarterly dividend in order to focus on paying down debt.

The 7 5/8% paper due 2024 traded down about 2 points to close at 60 bid. The 10½% paper due 2022 dropped ½ point to close at 84 bid. The 11% paper due 2025 gained 1 point to close at 77¼ bid.

Volume names trade

Notes in Luxembourg-based satellite communications company Intelsat closed the week in high volume. Trading has been largely positive after FCC chairman Ajit Pai made comments about the future of the country’s 5G network that would benefit satellite names.

The Intelsat Jackson SA 5½% notes due 2023 jumped up about ¼ point to close at 83½ bid. The 7¼% notes due 2020 lost about ½ point to close near 93¼ bid.

Britain-based drug maker Mallinckrodt retained high volume activity, which has been typical for the name since it completed the $1.2 billion acquisition of Rockville, Md.-based medical applications name Sucampo Pharmaceuticals.

The 4¾% issues due 2023 rose about ½ point to close above 79½ bid.

New York City-based cosmetics producer Revlon has continued the high volume trading that was largely instigated by the departure of CEO Fabian Garcia after a trend of revenue losses was not reversed.

The 5¾% paper due 2021 lost about 1¼ points to close at 80 bid. The 6¼% paper due 2024 dived around 5 points to close at about 66½ bid.

“This week was okay,” a trader said. “At least February is over. That was a rough month. We seem to be doing a little better but if the equity markets keep dropping like this we might see another February.”

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