J.C. Penney notes fall again on ratings downgrades; Diebold issues continue decline

By James McCandless

San Antonio, Aug. 17 – The distressed debt market closed the week focusing on names with recent earnings ties.

J.C. Penney Co., Inc. notes continued to drop as two ratings agencies issued downgrades in the aftermath of a dismal Q2 earnings report.

Diebold Nixdorf, Inc. issues fell again. One of the company’s largest lenders is in the process of securing a rescue loan.

Sanchez Energy Corp. paper improved. The company recently released lagging numbers in its Q2 earnings report.

Intelsat SA notes gained. Recently, a subsidiary brought a $1.25 billion offering of senior notes to market.

Frontier Communications Corp. issues were mixed to end the week. A recent Q2 report showed disappointing earnings.

Rite Aid Corp. paper was active but level. A potential merger with grocery chain Albertsons was recently canceled.

J.C. Penney falls

Plano, Texas-based department store chain J.C. Penney’s notes continued to fall, traders said, as two ratings agencies issued downgrades in the wake of the company’s Thursday Q2 report. Moody’s Investors Service lowered its corporate family rating and several issue-level ratings. Standard & Poor’s lowered its issuer credit rating and affirmed a negative outlook. (See related stories elsewhere in this issue.)

On Thursday, the company reported a 38 cents per share loss, missing analyst expectations of a 5 cents per share loss. It also posted $2.83 billion in revenue.

“The report was bad, but I don’t think their position in the retail space is any better or worse,” a trader said. “They’ll continue limping along in the space between Macy’s and Sears.”

The 7.4% bonds due 2037 lost about 3¼ points to close at around 48¾ bid.

On Thursday, the 7.4% bonds fell about 5½ points.

Diebold off

North Canton, Ohio-based connected commerce solutions company Diebold’s issues ended the week falling, market sources said. On Thursday, reports confirmed that JPMorgan Chase & Co., one of the company’s largest lenders, is working to secure a $500 million rescue loan to keep the company running. The company has hired Evercore and Credit Suisse as financial advisers in a search for a potential buyer.

The company’s most recent earnings report spurred both moves, posting a 29 cents per share loss against analyst predictions of a 1 cent per share profit.

The 8½% notes due 2024 shaved off about ¼ point to close at around 61¼ bid.

On Thursday, the 8½% notes dropped about 7 points.

Sanchez Energy up

Houston-based independent oil and gas producer Sanchez Energy paper improved, traders said. The company recently reported a 26 cents per share loss in its Q2 earnings statement, coming in below analyst expectations of the expected 6 cents per share profit. Its oil production numbers fell short of its own estimates.

The 6 1/8% paper due 2023 rose about 2½ points to close at around 53¾ bid.

On Thursday, the 6 1/8% paper was level.

Volume names trade

Luxembourg-based satellite communications company Intelsat’s notes gained. Recently, subsidiary Intelsat Connect Finance SA brought a $1.25 billion offering of senior notes due 2023 to market.

In its recent Q2 earnings report, the company posted a 38 cents per share loss, passing analyst estimates of a 37 cents per share loss. It also reported $537.71 million in revenues.

The Intelsat (Luxembourg) SA 7¾% notes due 2021 picked up about 1¾ points to close at around 96 bid. The 8 1/8% notes due 2023 added about 1¾ points to close at around 90¾ bid.

Norwalk, Conn.-based wireline communications name Frontier Communications issues ended the week mixed. Last Friday, Standard & Poor’s downgraded its issuer credit rating, senior unsecured debt rating and affirmed a negative outlook.

The 7 5/8% notes due 2024 were level at around 67¼ bid. The 10½% notes due 2022 dropped ¾ point to close at 89½ bid. The 11% notes due 2025 added about ¾ point to close at 80 bid.

On Thursday, the 7 5/8% notes rose ¼ point, the 10½% notes added ¼ point and the 11% notes lost about ¼ point.

Camp Hill, Pa.-based retail drugstore chain Rite Aid’s paper was level at the end of Friday trading. Last Thursday, reports confirmed that the company had dropped a potential merger with grocery chain Albertsons Co. LLC before putting the move to a shareholder vote.

On Tuesday, Standard & Poor’s lowered its outlook on the company from stable to negative and affirmed its B issuer credit rating.

The 7.7% paper due 2027 was level at 77½ bid.

On Thursday, the 7.7% paper lost about 2½ points.

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