J.C. Penney sales miss, bonds take hit; RadioShack shakes off store closures; Arch ends weaker

By Stephanie N. Rotondo

Phoenix, Feb. 4 - It didn't take long for J.C. Penney Co. Inc. to make headlines again and as a result of the latest news, the bonds took a hit.

The company reported same-store sales for the fourth quarter, which included the all-important holiday season. While the troubled retailer did see a sales gain - as opposed to the previous year's massive sales loss - it came in below estimates.

Fellow retailer RadioShack Corp. was also in the news, announcing the closure of about 500 stores. However, a trader said those bonds were holding their ground.

In the coal arena, Arch Coal Inc. reported earnings on Tuesday. Despite bolstering its liquidity, the company reported a wider loss for the fourth quarter on lower revenues. The company's debt dropped in response, though a trader noted that the debt had recovered from its intraday low.

Elsewhere in the distressed space, NII Holdings Inc.'s 8 7/8% notes due 2019 continued to improve, moving up a couple points to 49½ bid, 50 offered, according to a trader.

Another trader said Edison Mission Energy paper - which tends to trade in line with one another - closed firmer around 78. Also in the power producing sector, Energy Future Holdings Corp.'s 10% notes due 2020 fell to 105½ from 106, while the 10½% junior notes due 2016 - and linked to Texas Competitive Electric Holdings Co. LLC - slipped to 5½ from 6.

"I think they are getting closer to some sort of resolution," a trader said, as the company looks to deal with a massive debt load.

Also in distressed issues, MF Global Futures Ltd.'s 8¼% toggle notes due 2016 were "up 3 points since their last trade" at 56, the trader said.

J.C. Penney sales miss

J.C. Penney reported same-store sales for the fourth quarter on Tuesday. Though the Plano, Texas-based retailer posted a 2% gain in sales, analysts polled by Bloomberg had anticipated a 4.1% increase.

The quarter included the heavily depended upon holiday season. The company had previously said that it was "pleased" with the results from that time period. Sales during those nine weeks - November through December - were up 3.1% year over year.

The numbers didn't please investors much, however, and the bonds took a hit.

One trader called the debt "weaker," seeing the 6 7/8% notes due 2015 trading around "86-ish," down from 88. The 5.65% notes due 2020 fell into the high-60s from 71.

"So they are down a couple points," he said.

Another market source pegged the 5.65% notes at 69 bid, down almost 3 points from Monday.

J.C. Penney noted in its sales press release that online sales had jumped 26.3% during the quarter, a lone bright spot in the figures.

The company also said it ended fiscal 2013 with over $2 billion in available liquidity.

Gimme Credit LLC analyst Evan Mann said in an afternoon comment that the 2% quarterly gain seemed paltry over the previous year's 32% decline, even if it did mean management had met its goal of returning to positive territory.

"While [J.C. Penney] continues to make progress in turning around its business, it still has a long way to go and we see no room for error if the company wants to avoid a forced debt restructuring," he wrote.

RadioShack closing stores

RadioShack was also in the news again, as the company announced that it would shutter 500 stores in the coming months.

But a trader said there wasn't much reaction to that news, noting that the company's 6¾% notes due 2019 were "still just quoted" in a 60 to 61 context.

Like J.C. Penney, RadioShack has been attempting to revise its image and turn its business around. In the last few years, the company has lost market share to bigger stores, as well as to discount and online shopping.

The electronics retailer is based in Fort Worth.

Arch hurt by wider loss

Arch Coal posted a wider quarterly loss on Tuesday, which didn't do much to help the company's debt gain any traction.

One trader said the bonds were "down a bunch," though they "rebounded some" by the end of the day.

He saw the 7¼% notes due 2021 hit a low around 72½ before going out 74 bid, 75 offered. Still, that was down from 76.

St. Louis-based coal producer Arch Coal blamed its $371.2 million, or $1.75 per share, loss on weaker coal prices and disrupted rail service.

When adjusted for one-time items, the loss was 45 cents per share. Analysts had been expecting 45 cents per share.

The fourth quarter's loss compared to a loss of $295.5 million, or $1.39 per share, the year before.

Revenue declined 17% to $719.4 million. FactSet analysts had predicted revenue of $767 million.

For the year, net loss was $641.8 million, or $3.03 per share. Revenue was $3.01 billion. In 2012, the yearly total loss was $684 million, or $3.24 per share, on revenue of $3.8 billion.

But the company did note that it had upped its liquidity during the last quarter of 2013, ending with $1.4 billion.

The rest of the coal space did not fare too well during Tuesday trading either.

A market source said Alpha Natural Resources Inc.'s 6¼% notes due 2021 came off a deuce to close at 79¾ bid.

Another trader said that James River Coal Co. could be facing another round in bankruptcy court, noting news that the company had hired Perella Weinberg Partners LP as restructuring advisors.

"The debt is already trading at bankruptcy levels," he said, noting that he believed the 7 7/8% notes due 2019 were even trading flat, or without accrued interest.

He saw the issue in a 15 to 17 range on Tuesday, which he said was down 10 to 12 points from the previous week.

The company previously filed for Chapter 11 protections in 2003 and emerged in 2004. It has not turned a profit since 2010.

OSG unfazed by vessel bid

A trader said it was "quiet" in Overseas Shipholding Group Inc.'s bonds, even as the company received a lead bid for a planned $255 million vessel sale.

The trader noted that the news was "largely anticipated. The values they got were really no big deal."

He saw the 7½% notes due 2024 trading at 116½ bid, 117½ offered.

The trader also noted that the company's bank debt had broken through par and was trading around 104. He said that piece of debt had a "low coupon and it's callable.

"There has got to be something in the works on that," he said of the debt, given its above-par trades. "That's got to be trading at a negative yield."

As for the stock (OTCBB: OSGIC), it was down 53 cents, or 6.58%, at $7.52.

Five of OSG's units inked a stalking horse bid agreement for five of its vessels totaling $255 million. The vessels are held as collateral for secured financing provided by the Export-Import Bank of China.

The stalking horse bidders are Shipco 1, LLC, Shipco 2, LLC, Shipco 3, LLC and Shipco 4, LLC. They are subsidiaries of Ship Acquisition Co., LLC, a joint venture between affiliates of GSO Capital Partners LP and Euronav NV.

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