OGX inches up as creditors hire Rothschild; J.C. Penney adopts poison pill, bonds close mixed

By Stephanie N. Rotondo

Phoenix, Aug. 22 - It was a mixed day for the distressed debt market on Thursday, especially as most of the trading activity was focused on higher-grade issues.

Most of the day's distressed action centered on emerging market names like OGX Petroleo & Gas Participacoes SA. That company's debt was slightly stronger following news out late Wednesday regarding bondholders hiring Rothschild as a financial advisor.

Meanwhile, J.C. Penney Co. Inc. was making headlines again on word the troubled retailer had adopted a "poison pill" in order to avoid any takeover attempts.

The move came just days after the company reported dismal second-quarter earnings.

OGX creditors hire Rothschild

OGX's 8½% notes due 2018 were up half a point, closing around 183/4, according to a trader.

The gains came as it was reported that a group of bondholders led by Pacific Investment Management Co. had retained Rothschild to advise them on a debt restructuring.

For its part, OGX previously said in a regulatory filing that it had hired Blackstone Group LP to advise on a potential restructuring.

With just $326 million in cash available at the end of the second quarter, investors are becoming increasingly concerned that the Brazilian oil producer will soon run out of cash.

Also, rumor has it that OGX will likely turn over its Tubarao Azul oil field - the only field OGX has that is currently producing - to the Brazilian government next year. The company had alluded to that earlier this year, when it said that the costs to run the oil platform were not cost effective.

In other emerging market names, SMU SA's 7¾% notes due 2020 were seen down over 2 points at 703/4.

Earlier this month, the Chilean grocery store operator said that it intended to raise as much as $400 million via asset sales.

And, Petroleos de Venezuela SA's 9% notes due 2021 were "up a smidge" at 823/4, while the 8½% notes due 2017 held in around 90 1/8.

J.C. Penney implements poison pill

J.C. Penney is looking to avoid any takeover attempts as it tries to turn itself around. To that end, it had adopted a "poison pill" that allows current shareholders to buy more stock should any individual or entity acquire more than 10% of the shares.

Bill Ackman's Pershing Square Capital Management, LP, Vornado Realty Trust and certain affiliates are exempt from the new plan, however.

On the news, the Plano, Texas-based company's debt reacted in mixed fashion.

A trader said the 5.65% notes due 2020 dipped slightly to 743/4, while the 6 3/8% notes due 2036 rose a touch to 691/4.

The 7.4% notes due 2037 were unchanged at 673/4.

The trader noted that trading in the name was thin.

Another market source called the 5.65% notes up almost a point at 74¾ bid.

The adoption of the "poison pill" came just two days after the company reported weak earnings for the second quarter. Still, management asserted that preliminary data on back-to-school sales was "encouraging."

On Tuesday, J.C. Penney reported a loss of $586 million, or $2.66 per share. That compared to a loss of $147 million, or 67 cents per share, the year before.

Same-store sales declined by 12% and revenues fell to $2.66 billion from $3.02 billion.

The company said sales remained weak due to ongoing store renovations and "disappointing re-merchandising of its home departments."

At the end of the quarter, liquidity was $1.5 billion in cash, including a $2.1 billion loan it inked with Goldman Sachs during the quarter. The company said it is hoping to close out the year with that much in its coffers.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.