J.C. Penney notes crater after releasing Q2 earnings report; Diebold issues drop as lender shops rescue loan

By James McCandless

San Antonio, Aug. 16 – Trading in the distressed debt market on Thursday turned to J.C. Penney and others with recent earnings reports.

J.C. Penney Co., Inc. notes cratered after the company released a dismal earnings report, falling short of analyst estimates.

Diebold Nixdorf, Inc. issues saw a multi-point drop as one of its largest lenders tries to secure a loan to keep the company afloat.

Sanchez Energy Corp. paper was active but level. The company’s recent Q2 report showed a weakened position in the energy sector.

Frontier Communications Corp. notes ended mixed again. The company recently released a troubling earnings report.

Rite Aid Corp. issues declined. The company recently nixed a potential merger with grocery chain Albertsons.

Mallinckrodt plc paper improved in the medical space.

J.C. Penney falls

Plano, Texas-based department store chain J.C. Penney’s notes cratered, traders said, after the company released its Q2 earnings report Thursday morning. The company reported a 38 cents per share loss, falling short of analyst expectations of a 5 cents per share loss. It also posted a lagging $2.83 billion in revenue.

“It was pretty much J.C. Penney’s day,” a trader said. “Nothing very good was expected but this was especially bad, so that’s what made it so topical.”

The 7.4% bonds due 2037 lost about 5½ points to close at around 52 bid.

Diebold down

North Canton, Ohio-based connected commerce solutions company Diebold issues fell, market sources said. Reports surfaced Thursday that JPMorgan Chase & Co., one of the company’s largest lenders, is trying to secure a $500 million rescue package to keep the company afloat. The company has hired Evercore and Credit Suisse as financial advisers in a search for a potential buyer.

Both moves come on the heels of a recent earnings report, in which the company posted a 29 cents per share loss in its Q2 earnings report, failing to reach analyst expectations of a 1 cent per share profit.

The 8½% paper due 2024 dropped about 7 points to close at around 61¾ bid.

On Wednesday, the 8½% paper fell about 2¼ points.

Sanchez Energy level

Houston-based independent oil and gas producer Sanchez Energy’s paper was level, traders said, despite the continuing trend of active trading. The company recently reported a 26 cents per share loss in its Q2 earnings statement, falling short of the expected 6 cents per share profit. Its oil production numbers fell short of its own estimates.

The 5¼% paper due 2019 was level at 51¼ bid.

On Wednesday, the 5¼% paper lost 4¼ points.

Volume names trade

Norwalk, Conn.-based wireline communications name Frontier Communications notes continued a mixed trend. Last Friday, Standard & Poor’s lowered its issuer credit rating, senior unsecured debt rating and affirmed a negative outlook.

The 7 5/8% notes due 2024 rose ¼ point to close at 67¼ bid. The 10½% notes due 2022 added ¼ point to close at 90¼ bid. The 11% notes due 2025 lost about ¼ point to close at around 79¼ bid.

On Wednesday, the 7 5/8% notes were level, the 10½% notes dropped about ½ point and the 11% notes lost ¼ point.

Camp Hill, Pa.-based retail drugstore chain Rite Aid issues declined. Last Thursday, reports confirmed that the company had cancelled 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% issues due 2027 lost about 2½ points to close at around 77½ bid.

On Wednesday, the 7.7% issues gained about 3 points.

Staines-Upon-Thames, U.K.-based drug maker Mallinckrodt rose. Recently, the company reported earnings of $1.78 per share profit, beating analyst expectations.

The 4¾% paper due 2023 added about 1¾% points to close at around 88 bid.

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