J.C. Penney trending higher in wake of Ackman sale; Justice could settle AMR/US Airways lawsuit

By Stephanie N. Rotondo and Paul Deckelman

Phoenix, Aug. 29 - The distressed debt market followed equities higher on Thursday, as new economic data indicated that the economy was growing more than expected.

However, overall activity was thin as the Labor Day weekend approached.

"We were way under a billion," a trader said of total trading in the high-yield space. "Tomorrow we'll probably get nothing."

J.C. Penney Co. Inc. paper continued to "trend higher," a trader said, as the market continued to react positively from news earlier in the week regarding Bill Ackman's sale of his stake in the struggling retailer.

"The fact that the equity deal seemed to be placed fairly well could be viewed positively," the trader said.

Meanwhile, AMR Corp.'s debt were somewhat stronger, albeit in thin trading, as the Department of Justice indicated it would be willing to settle an antitrust lawsuit that placed the company's planned merger with US Airways on hold.

In the emerging market space, OGX Petroleo e Gas Participacoes SA saw its bonds inching up as The Wall Street Journal reported that a restructuring plan could be unveiled in the next two weeks.

J.C. Penney trends upward

J.C. Penney's 5.65% notes due 2020 were rising in light trading on Thursday, as investors continued to react positively to Bill Ackman's sale of his stake in the Plano, Texas-based retailer.

One market source placed the issue at 76½ bid, while another saw the notes in a 76 to 76 3/8 context.

On Monday, J.C. Penney said that Ackman's Pershing Square Capital Management fund was divesting its stake, just a few weeks after Ackman exited the company's board over a dispute on a search for a new chief executive officer. In a regulatory filing on Wednesday, the fund disclosed that it had sold its 39.1 million shares for $12.60 per share.

Ackman had previously paid an average of $25 per share when he bought the stake in 2010.

AMR could settle DOJ suit

Holders of AMR and US Airways Group Inc. bonds reacted warily Thursday to the late-Wednesday news that the Justice Department and the airline companies would be open to settling their legal dispute over whether the two companies should be allowed to merge.

A trader said that AMR's 6¼% convertible notes due 2014 were trading in a par to 100¼ bid context, "about where they've been over the last couple of days," estimating the volume at around $15 million.

A second market source said that AMR paper had initially softened a bit, hitting a morning low of 99½ bid, versus Wednesday's close at 1001/4, but had moved back up to end Thursday unchanged, on volume of more than $14 million.

A third source called the debt stronger, seeing the notes trading around par.

"It's pretty well bid at par," he said.

US Airways' 6 1/8% notes due 2018 jumped to 93½ bid at the close, a gain of 2¼ points, but only on a bunch of smallish odd-lot trades, according to a market source.

Another trader pegged the issue around 911/4.

AMR's exit term loan remained strong in the secondary market on Thursday as well.

The term loan was quoted by one trader at 98¾ bid, 99¼ offered and by a second trader at 98¾ bid, 99¾ offered, with both traders saying levels were unchanged on the day.

More on AMR, US Airways

Sources said that at a hearing, the judge in the bankruptcy case did not confirm the reorganization plan but implied that arguments for confirmation were persuasive.

Shareholders of the two companies seemed a little more enthusiastic at the prospect of a settlement - and about a federal bankruptcy judge's statement Thursday that he was leaning toward confirming Fort Worth-based AMR's plan of reorganization, although he has not done so just yet.

AMR's over-the-counter-traded shares were up 34 cents, or 11.15%, at $3.39, on volume of 17.1 million shares, almost twice the norm. Tempe, Ariz.-based US Airways' New York Stock Exchange-traded shares gained 62 cents, or 4.04%, to move up to $15.96, on volume of 7.5 million shares, about 12% more than the usual turnover.

In a document filed jointly by the Justice Department and the two companies with the federal district court in Washington on Wednesday, the government said it was "open to a settlement that addresses the anticompetitive harms posed by the merger but [had] not yet received any such proposal from the defendants."

"We continue to believe [that the lawsuit] will never go to trial, and instead will be resolved with a negotiated settlement that clears the way for the merger to be approved," wrote Gimme Credit LLC analyst Vicki Bryan in an afternoon comment sent out Thursday. "We continue to argue that stalling this merger unnecessarily hurts consumers as much as AMR's near 80,000 employees plus its suppliers, business partners and investors."

OGX plan in the works

A trader said OGX's 8½% notes due 2018 were up 1½ points to 18½ on Thursday.

"That's a monster percentage move," he said.

Another trader pegged the issue around 18½ as well.

"There's really a wide range of levels," the second trader said, seeing trades occurring "anywhere between 17 and 19." He said most of the action was in an 18 to 19 context, which compared to recent trading levels with a 17 handle.

The Wall Street Journal reported Thursday that the Brazilian oil producer owned by Eike Battista is gearing up to release a restructuring plan within the next two weeks. The plan is expected to include a debt-for-equity swap, as well as a plan to raise new capital.

However, it remained unclear whether creditors would be willing to accept the deal or if they would require Battista to put up more of his own money to save the flailing company - especially as OGX plans to close its only producing field, Tubarao Azul, next year.

Sara Rosenberg contributed to this article

© 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.