Best Buy swings to loss in Q3, bonds dip; Overseas Shipholding, J.C. Penney see active trading

By Stephanie N. Rotondo

Phoenix, Nov. 20 - Distressed debt remained strong Tuesday as the market prepared for an early close Wednesday due to Thanksgiving.

However, not all names were following the overall trend.

Best Buy Co. Inc. reported third-quarter results early in the day, which led to a dip in the bonds and a sizable loss in the stock.

Away from Best Buy, most of the action in the distressed arena was centered around recently topical names such as J.C. Penney Co. Inc. and Overseas Shipholding Group Inc. For the former, traders gave mixed reports as to the bonds' performance during the session, while Overseas Shipholding was seen having a "nice rebound," as one trader put it.

Best Buy falls on earnings

Best Buy bonds dropped nearly 2 points on Tuesday, after the electronics retailer reported weaker-than-expected earnings for its third quarter.

A trader called the 5½% notes due 2021 down 1¾ points at 853/4, though on only "a handful of trades."

Another trader said the issue had fallen 1½ points to end around 86.

The company's stock (NYSE: BBY) lost $1.79, or 13.02%, to close at $11.96.

Net loss for the quarter was $13 million, or 4 cents per share. That compared to a profit of $173 million, or 47 cents per share, the year before.

Sales declined to $10.75 billion from $11.15 billion.

Same-store sales were meantime down 4.3%.

In its conference call to discuss the results, Best Buy's management indicated its belief that the fourth quarter would not be as bad as the third, due in part to its hopes that the holiday shopping season would be a good one.

However, the weak numbers could encourage investors to consider a buyout offer from co-founder Richard Schulze.

A final proposal is expected from Schulze by the end of the year. It is expected that any offer would be below the original price per share offer of $24 to $26.

Penney, Overseas Shipholding active

Recently topical names like J.C. Penney and Overseas Shipholding continued to be active on Tuesday.

Following a similar downgrade from Standard & Poor's on Monday, Moody's Investors Service cut J.C. Penney's rating on Tuesday.

A trader said the ratings were "knocked down two or three notches" to B3.

That same trader saw the Plano, Texas-based retailer's debt fall about a point on the day, the 6 3/8% notes due 2036 at 74½ and the 7.4% notes due 2037 at 84.

But another trader said the bonds were mostly unchanged, seeing the 7.4% notes at 84½ bid, 85 offered and the 5.65% notes due 2020 at 841/2.

A third source called the 5.65% notes up half a point at 84½ bid.

Meanwhile, New York-based oil tanker company OSG paper had "a nice rebound," a trader said. He called the 8 1/8% notes due 2018 up a deuce at 401/2.

Another trader also placed the issue around 40, which compared to levels around 38½ previously.

And, Edison Mission Energy debt was "largely better," according to a trader, despite yet another downgrade.

S&P had dropped its ratings on the Rosemead, Calif.-based power producer on Monday and Fitch Ratings followed suit on Tuesday.

The trader pegged the company's bonds at 47½ bid, 48 offered. The debt tends to trade in line with each other.

© 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.