Distressed market firm ahead of holiday, but volumes muted; Best Buy stays weak post-earnings

By Stephanie N. Rotondo

Phoenix, Nov. 21 - The distressed debt market was shutting down early Wednesday in preparation for the Thanksgiving holiday on Thursday.

A trader said it was "not technically an early close," but noted that around lunchtime, things were already starting to get wrapped up.

Given such, there was "no real volume in trades," another trader said, with just half a billion in total high-yield volume by noon on the East Coast.

"Prices are firm, but there are no real outliers," a trader remarked.

Of the day's dealings, it continued to be currently topical names like Best Buy Co. Inc. and J.C. Penney Co. Inc.

Best Buy softens post-earnings

A trader saw continued weakness in Best Buy bonds, just one day after the company reported weaker-than-expected earnings.

He called the 5½% notes due 2021 down nearly a point at 85.

In a report put out Tuesday, Best Buy swung to a loss for the third quarter. 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.

In other topical retail names, J.C. Penney's 7.95% notes due 2017 were pegged at 943/4, down over half a point.

Distressed market firm

Among other goings-on in the distressed realm, a trader said Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 were being quoted higher in the low-40s, though he noted that there were not round lot trades during the abbreviated session.

The trader also saw Clear Channel Communications Inc.'s debt "continue to creep up," placing the 11% and 10¾% notes due 2016 at 70 bid, 71 offered, up half a point.

At another shop, a trader said Caesars Entertainment Corp.'s 5 5/8% notes due 2015 put on 1½ points to trade around 81.

And, Nokia Corp.'s 5 3/8% notes due 2019 were "getting better," the trader said. He deemed the debt up a point at 871/2.

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