J.C. Penney paper rebounds on sales, cash report; OGX notes regain ground; Exide pushes higher

By Stephanie N. Rotondo

Phoenix, Oct. 8 - J.C. Penney Co. Inc. and OGX Petroleo & Gas Participacoes SA remained topical in the distressed debt space on Tuesday.

J.C. Penney's debt was rebounding some after the company said it would have ample liquidity by the end of the year. The retailer also reported improved sales for September when compared with August.

Meanwhile, OGX debt was also rallying a touch, though the bonds remained in the single digits. With the bonds trading at current levels, however, investor concerns about a possible liquidation are growing.

Also inching higher were Exide Technologies Inc. bonds. Late Monday, the company said it had reached an agreement with California state regulators over its Vernon, Calif.-based recycling plant, in which the company has agreed to invest $7 million into the polluting factory.

And, Overseas Shipholding Group Inc. paper was holding in on Tuesday, according to a trader. After the market closed, the company filed its 10-Q for the quarter ending June 30.

J.C. Penney debt rallies

A trader called J.C. Penney's 5.65% notes due 2020 up 1½ points on the day, closing at 703/4.

That level was echoed at another desk.

The Plano, Texas-based retailer has seen its debt on the decline of late, as investors wonder if the company can pull itself together and turn around its business. Tuesday's rally, however, was due to signs that it might be doing just that.

For the month of September, same-store sales were down 4% year over year, but improved by 540 basis points when compared with August.

The company said certain segments, such as women and men's apparel, were showing signs of improvement.

Additionally, online sales rose more than 25% during the month. For the third quarter to date, online sales were up 18.6%.

J.C. Penney also reported that it would have more than enough cash at the end of the year, forecasting more than $2 billion in its coffers. The liquidity cushion was boosted by a recent stock sale that brought in $785 million.

OGX notes rebound

OGX's 8½% notes due 2018 put on a couple points during Tuesday trading after falling to new lows around 6 on Monday.

A trader called the issue up 2½ points at 81/2.

He also saw the 8 3/8% notes due 2022 at 71/2.

The Brazilian oil producer missed a $44.5 million coupon on the 2022 paper last week and has said it will not use the grace period to pay the interest. On the heels of that news came a report that that company's only viable field, Tubarao Martelo, may contain up to 108.5 million barrels of crude - far less than the 285 million barrels the company had predicted last year.

The company has also sold off other assets in order to shore up its cash this past year. As such, investors fear that there are not enough assets to cover the $3.6 billion of bonds in the event of a bankruptcy. Given where the bonds are currently trading, it seems more than a few believe that a liquidation is more likely than a restructuring.

Exide debt powers up

Exide Technologies 8 5/8% notes due 2018 were "up a bit," a trader said.

He pegged the bonds around 74½ to 75.

The upward push came after the company said late Monday that it would invest $7 million over two years into its Vernon, Calif.-based recycling plant under an agreement with California Department of Toxic Substances Control.

The Vernon plant had been shuttered in April due to a toxic leak. The battery recycling center reopened in June.

Though the agreement still needs to be approved by the bankruptcy court overseeing its case, the Milton, Ga.-based battery maker has said it will begin upgrading the plant to meet current standards.

OSG files 10-Q

Overseas Shipholding's 8 1/8% notes due 2018 were holding in around 84, according to a trader.

The debt might see some action come Wednesday however, as investors react to a late 10-Q filing.

In the filing, the New York-based bankrupt shipping company reported a net loss of $24.15 million for the period ending June 30. That compared with a loss of $52.7 million the year before.

Revenues declined to $228.11 million from $291.35 million.

The company posted total assets of $4.04 billion and total liabilities of $3.67 billion.

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