J.C. Penney bonds steady after Q1 report; Ultra Petroleum notes up despite ratings downgrade

By James McCandless

San Antonio, May 17 – The distressed debt market experienced a low activity day on Thursday, traders reported, with few news-driven names driving trading.

J.C. Penney Co., Inc. bonds were level despite Thursday’s release of the company’s Q1 report, which included falling revenues and earnings.

Ultra Petroleum Corp. notes traded up despite a ratings downgrade. Last Thursday, the company released its Q1 report.

American Tire Distributors issues declined as the company works to recapture investor confidence after losing a distribution partnership with Goodyear.

Intelsat SA paper was mixed. The company recently posted a disappointing Q1 report. Adding to the volume in telecom, Frontier Communications Corp. notes were mixed. Mallinckrodt plc issues traded down.

J.C. Penney level

Plano, Texas-based department store chain J.C. Penney bonds were level, traders confirmed, amid the company’s release of its Q1 report. The company reported a 4.1% decrease in revenue year-over-year.

It also reported a 22 cent loss per share, 2 cents below analyst estimates.

“The standard for this sector is Macy’s, and this is nowhere near that,” a trader said. “I think they’re blaming a lot of this on bad weather as opposed to something they can actually change, which can’t instill much confidence.”

The 7.4% bonds due 2037 were level at 64 bid.

Ultra Petroleum up

Houston-based independent oil and gas producer Ultra Petroleum notes gained on the day, traders reported, despite a ratings downgrade from Standard & Poor’s. The agency lowered Ultra Petroleum’s corporate credit rating and affirmed a negative outlook (see related story elsewhere in this issue).

Last Thursday, the company’s Q1 report showed a profit of 24 cents per share and a net income of $47.5 million, counteracting a loss from last quarter.

The 7 1/8% notes due 2025 rose 2¼ points to close at 65½ bid. The 6 7/8% notes due 2022 traded up ¼ point to close at 69 bid.

On Wednesday, the 7 1/8% notes lost ¾ point and the 6 7/8% notes dropped 1 point.

American Tire loses

Huntersville, N.C.-based tire distributor American Tire issues fell, market sources confirmed, as the company tries to reassure investors that its balance sheet will remain healthy despite losing its distribution deal with Goodyear.

The former partnership was worth 20% of the company’s business.

The 10¼% notes due 2022 shaved off 1½ points to close at 50½ bid. They had jumped up 3 points on Wednesday.

Volume names trade

Luxembourg-based satellite communications company Intelsat paper was mixed. Recently in a Q1 report the company posted a 56 cents per share loss, missing analyst predictions of 41 cents per share.

The Intelsat (Luxembourg) SA 7¾% paper due 2021 dropped about 1 point to close around 78 bid. The 8 1/8% paper due 2023 gained ½ point to close at 71¾ bid.

Elsewhere in telecom, Norwalk, Conn.-based wireline telecom name Frontier Communications issues notes were mixed. Last week, the company beat analyst estimates by reporting a Q1 loss of 58 cents per share and $2.2 billion in revenue.

The 7 5/8% notes due 2024 were level at 70¼ bid. The 10½% notes due 2022 declined about 1 point to close at around 91 bid. The 11% notes due 2025 lost about ½ point to close at around 81½ bid.

Britain-based drug maker Mallinckrodt saw its 4¾% issues due 2023 fall about ¾ point to close at around 78½ bid.

“Today was pretty in line with the rest of the week, which has been really slow,” a trader said. “To me, this week has been spent already. Let’s hope for more next week.”

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