J.C. Penney notes improve despite downgrade; Sanchez Energy issues continue to rise with oil futures

By James McCandless

San Antonio, Aug. 21 – The distressed debt market was active around names with recent news surrounding them on Tuesday.

J.C. Penney Co., Inc. notes improved despite a ratings downgrade from Fitch in the wake of a negative earnings report.

Sanchez Energy Corp. issues continued to rise, trailing oil futures. The company recently reported disappointing earnings.

Diebold Nixdorf, Inc. paper gained. A large lender to the company is working to secure a rescue loan.

Intelsat SA notes continued to trade mixed. A subsidiary recently brought a $1.25 billion issue of senior notes to market.

Frontier Communications Corp. issues were mixed. A recent Q2 report showed lower than expected earnings.

Mallinckrodt plc paper traded up in the medical space. The company recently beat earnings estimates in its Q2 report.

J.C. Penney rises

Plano, Texas-based department store chain J.C. Penney’s notes improved Tuesday, traders said, despite another ratings downgrade. Fitch Ratings lowered the company’s long-term issuer default rating and affirmed a stable outlook. (See related story elsewhere in this issue.)

On Friday, 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.

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 7.4% bonds due 2037 rose about ¾ point to close at around 48¼ bid.

On Monday, the 7.4% bonds lost about 1¼ points.

Sanchez Energy gains

Houston-based independent oil and gas producer Sanchez Energy’s issues rose again, market sources said, trending in the direction of rising oil futures. Recently, the company reported a 26 cents per share loss in its Q2 earnings statement, coming in under analyst expectations of 6 cents per share profit. Its oil production numbers did not meet its own estimates.

“Sanchez continues to be topical,” a trader said. “It’s a go-go name by itself, but when it’s tied with any news in the energy sector volume jumps.”

The 6 1/8% notes due 2023 gained 1½ points to close at 56½ points.

On Monday, the 6 1/8% notes about 1¼ points.

Diebold up

North Canton, Ohio-based connected commerce solutions company Diebold’s paper gained, traders said, stemming a four-day decline. JPMorgan Chase & Co., one of the company’s largest lenders, is working to secure a $500 million rescue loan to aid the financially troubled name. The company has hired Evercore and Credit Suisse as financial advisers in a search for a potential buyer.

The 8½% paper due 2024 rose about 2½ points to close at 63 bid.

On Monday, the 8½% paper lost about ¾ point.

Volume names trade

Luxembourg-based satellite communications company Intelsat’s notes were mixed again. Recently, subsidiary Intelsat Connect Finance SA issued a $1.25 billion offering of senior notes due 2023.

In its latest Q2 earnings report, the company showed a 38 cents per share loss, rising past 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 lost about ½ point to close at around 96¾ bid. The 8 1/8% notes due 2023 added about ¼ point to close at around 87¾ bid.

On Monday, the 7¾% notes picked up about 1¼ points and the 8 1/8% notes lost about 3¼ points.

Norwalk, Conn.-based wireline communications name Frontier Communications issues were also mixed. Recently, after a negative earnings report, Standard & Poor’s downgraded its issuer credit rating, senior unsecured debt rating and affirmed a negative outlook.

The 7 5/8% notes due 2024 traded up about ¾ point to close at around 66¾ bid. The 10½% notes due 2022 rose about ½ point to close at around 90½ bid. The 11% notes due 2025 shaved off about ¼ point to close at around 79½ bid.

On Monday, the 7 5/8% notes lost about 1¼ points, the 10½% notes rose about ½ point and the 11% notes fell ¼ point.

Staines-upon-Thames, U.K.-based drug maker Mallinckrodt paper improved. In its recent Q2 report, the company posted a $1.78 per share profit, coming in above analyst expectations of $1.49 per share profit.

The 4¾% paper due 2023 rose about 1½ points to close at around 87½ bid.

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