Distressed bond market remains under pressure, but Sears, Radio Shack hang in

By Paul Deckelman

New York, Jan. 27 - The distressed debt market saw another down day on Monday, traders said, although activity levels seemed to fall off from where they had been last week, when key distressed issues such as NII Holdings Inc. first rose in line with a stronger overall junk bond market, but then fell toward the end of the week as junk slid along with stocks.

NII's bonds were seen mostly lower on Monday, although their volume levels were off.

Traders meantime saw little price movement in the Caesars Entertainment Corp. 2018 bonds, usually the giant casino operator's most actively traded issue.

In the retailing space, the traders saw pretty much a mixed bag. While Sears Holding Corp.'s bonds were seen "hanging in there," in the words of one trader, bucking the overall easier trend, rival department store operator J.C. Penney Co. Inc.'s notes were seen mostly lower on the session.

Radio Shack Corp.'s bonds - which rose last week on the news that a hedge fund had taken a position in the electronics retailer's shares - were seen little changed on Monday, as investors mulled over the company's announcement unveiling a new brand-positioning strategy.

Sears seen higher

A trader said that "Sears had some activity today," noting dealings in the Hoffman Estates, Ill.-based department store operator's 6 5/8% notes due 2018.

He pegged those bonds around an 89 to 90 bid context going home, calling them pretty much unchanged on the day and estimating volume at about $15 million.

A market source at another desk saw round-lot trading of over $9 million, in addition to brisk trading in the smaller odd lots, and quoted the issue at 90 3/8 bid, up ¼ point on the day.

Sears, another trader said, "hung in there," even as fellow retailers like J.C. Penney were losing ground.

"A lot of Sears traded today," he said, also seeing the bonds having gotten as good as 90 3/8 after having traded earlier at 89½ bid to 90 3/8 offered. He called those levels "basically unchanged."

Sears' New York Stock Exchange-traded shares also managed to buck a generally negative equity trend, gaining 24 cents, or 0.63%, to end at $38.39, in contrast to Penney's NYSE-traded stock, which lost 19 cents, or 2.84%, to close at $6.51. There was no fresh news out on either company.

Penney paper punished

Back in the junk bond market, Penney's 5¾% notes due 2018 lost 2½ points, a trader said, to end at 73 bid, and he saw the troubled Plano, Texas-based department store operator's 5.65% notes due 2020 off by ½ point at 70½ bid.

"So, while Sears hung in," he said, "[Penney] got weaker."

A second trader agreed that the company's notes had gone lower on Monday. He said that the 53/4s had lost 1 point on the day lost between ½ point and 1 point to end in a 72 to 73 bid context.

"They've been drifting lower over the past few days," he noted, with investors apparently not mollified by the company's optimistic assertion earlier in the month that it was pleased with its performance during the just-concluded holiday sales period, or by Penney's announcement a week later that it would close 33 under-performing stores and cut headcount by 2,000, in hopes of saving $65 million this year.

A trader saw Penney's 7.40% bonds due 2037 easing by 2½ points to 69, although he noted that round-lot volume was only $1 million.

Its 6 3/8% bonds due 2036 were unchanged at 68 bid, 70 offered, in similarly quiet dealings.

Radio Shack unveils plan

Also in the retailing space, RadioShack's 6¾% notes due 2019 "were hanging around 60," a trader said, declaring that there was "not a whole lot of activity there."

A second source saw only one or two large trades in the issue, which continued to trader in a 60¼ to 60½ context.

The Fort Worth, Texas-based consumer electronics retail chain operator's bonds, and its shares, had risen solidly last week on the news that hedge-fund Litespeed Management LLC had taken a passive 8.1% stake in the company.

There was further news out on Monday, as the company announced its new brand-positioning initiative, using the slogan "It Can Be Done, When We Do It Together."

The company's chief executive officer, Joe Magnacca, proclaimed that "RadioShack is realigning our brand around our core purpose, which goes beyond our great product assortment and price match guarantee. RadioShack helps consumers find the products they need to connect and power their lives. More importantly, RadioShack can help create technology-based solutions that make anything possible.

"This new approach gives us an internal rallying cry to motivate our team of almost 30,000 associates to go the extra mile for our customers as we continue to make progress with our turnaround plan."

NII fall continues

Away from retailing, a trader said that NII Holdings' 10% notes due 2016 "seemed a little heavier," quoting them down around 1 point on the day at around 61 bid, 62 offered. He estimated volume at around $7 million - well under the volume levels recently seen in the Reston, Va.-based company's bonds, which had risen solidly in the past two weeks, helped by a series of corporate news announcements.

Those bonds had traded as high as 66-67 early last week, but have gradually come in since then.

He saw its 7 5/8% notes due 2021 unchanged at 41 bid, 43 offered, with about $4 million having changed hands, "so there wasn't a whole lot of activity."

Those bonds had recently traded as high as the mid-40s

Caesars ease a little

A trader said that Caesars Entertainment's 10% notes due 2018 were ending the day around 49½ bid, 50½ offered, which he called about unchanged from where they had been on Friday.

He said that around $10 million of the bonds had traded, down from their usual brisk turnover.

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