J.C. Penney notes slide after earnings release; Hexion issues decline on revised negative outlook

By James McCandless

San Antonio, Nov. 15 – The distressed space saw another soft day during Thursday’s session.

J.C. Penney Co., Inc.’s notes dove after the company released a disappointing third-quarter report Monday morning.

Elsewhere, PetSmart, Inc.’s issues fell while Rite Aid Corp.’s paper traded mixed.

Chemicals name Hexion, Inc.’s notes declined after a ratings agency revised its outlook to negative.

In coal, Cloud Peak Energy Inc.’s issues were rising as a ratings agency revises the recovery rating on its second-liens.

Sector peer Murray Energy Corp.’s notes saw a boost.

Elsewhere in energy, negativity in the oil space continued for California Resources Corp., Weatherford International plc and Sanchez Energy Corp.

J.C. Penney reports

J.C. Penney’s notes fell Thursday, traders said.

The 5.65% notes due 2020 dropped 6 points to close at 80½ bid. The 8 5/8% notes due 2025 lost 2¾ points to close at 60¾ bid.

On Thursday morning, the Plano, Texas-based department store chain issued its third-quarter earnings report, showing a 52 cents per share loss where analysts predicted a 57 cents per share loss.

Despite the earnings beat, investors were focused on its disappointing sales revenue, a market source said.

The company reported revenues of $2.73 billion, missing guidance targets and slashing future guidance.

“It was up on the equity side, but I think that was just people reading the top line,” a trader said. “There’s a long-term problem here that they need to fix before becoming the next retailer on the chopping block.”

Elsewhere in the sector, Phoenix-based pet supplies retailer PetSmart’s issues fell.

The 5 7/8% notes due 2025 fell ½ point to close at 77½ bid.

Camp Hill, Pa.-based drug store chain Rite Aid’s paper was mixed.

The 6 1/8% paper due 2023 shed 4½ points to close at 84¼ bid. The 7.7% paper due 2027 rose 1¼ points to close at 74¼ bid.

Hexion down

Elsewhere, Hexion’s notes moved lower, market sources said.

The 6 5/8% notes due 2020 shaved off ¼ point to close at 84¼ bid. The 9% notes due 2020 lost 2 points to close at 51 bid.

On Thursday, Standard & Poor’s revised its outlook of the Columbus, Ohio-based chemicals producer to negative.

“Not much of a surprise here considering their precarious structure,” a trader said.

The company has $2.5 billion in debt maturing in 2020.

Cloud Peak gains

Meanwhile, Cloud Peak’s issues continued to rise, traders said.

The 12% notes due 2021 added 2½ points to close at 67 bid.

On Wednesday, the 12% notes picked up 4½ points.

The Gillette, Wyo.-based coal producer’s issues rose after S&P revised its recovery rating for the second-lien notes to 3 from 4.

The adjustment came after the company eliminated its $150 million revolving credit facility, terminating first-lien claims.

The board is exploring strategic alternatives, including a sale of the company.

St. Clairsville, Ohio-based sector peer Murray Energy’s paper saw a boost.

The 11¼% paper due 2021 jumped 11 points to close at 58 bid.

“Apparently they just settled a dispute with FirstEnergy’s coal arm, but there aren’t a lot of details on that yet,” a trader said.

Oil weaker

Despite a rise in crude oil futures, California Resources’ bellwether notes were negative, market sources said.

The 8% notes due 2022 dropped 2¼ points to close at 84 bid. The 6% notes due 2024 fell 2½ points to close at 76 bid.

Known for tracking oil futures, the Los Angeles-based independent oil and gas producer’s notes have been under pressure during the last month as oil futures decline.

Baar, Switzerland-based oilfield services provider Weatherford’s issues were also moving lower.

The 8¼% notes due 2023 lost 2½ points to close at 65 bid. The 9 7/8% notes due 2024 fell 1½ points to close at 64¼ bid.

Houston-based producer Sanchez Energy’s 6 1/8% paper due 2023, while pushing higher in intraday trading, ended back at Wednesday’s level of 36 bid, according to Trace data.

After a run of steady losses, West Texas Intermediate crude oil futures strung together two days of gains, rising 21 cents to end the session at $56.46 per barrel. Brent North Sea crude futures ended up 42 cents to $66.54 per barrel.

The Energy Information Administration reported an increase in crude inventories by 10.3 million barrels, outpacing analyst expectations of 3.2 million.

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