J.C. Penney, NII Holdings get stock downgrades, bonds decline; RadioShack rises on new GE loan

By Stephanie N. Rotondo

Phoenix, Oct. 21 - J.C. Penney Co. Inc. led the day's downers, one distressed debt trader said on Monday.

The bonds were not overly active, however, as the overall liquidity of the day was deemed "dreadful."

The retailer's debt dropped 2 to 4 points on the day after Imperial Capital issued an equity downgrade for the company, cutting its price target to $1 per share from $5 per share.

NII Holdings Inc. also saw its equity downgraded, this time from Credit Suisse. Those bonds were also softer on the day.

But RadioShack Corp. got a late-day boost following word that GE Capital had agreed to extend an $835 million loan to the struggling company.

Proceeds will be used to refinance outstanding bank debt. The news of the new financing came just one day before the company was slated to release earnings.

J.C. Penney day's big loser

Imperial Capital cut its equity rating on J.C. Penney, slashing the share price target to $1 per share from $5 per share.

In her report, analyst Mary Ross Gilbert said that a restructuring could occur in 2014.

On the news, the stock (NYSE: JCP) sunk to new lows, falling 58 cents, or 8.29%, to $6.42.

As for the bonds, one trader saw the debt off 2 to 4 points, depending on the issue.

He saw the 5¾% notes due 2018 lose over 4 points to end at 691/4, while the 7.95% notes due 2017 dropped nearly 4 points to close around 77. The 7.4% notes due 2037 declined by 3 points to 62½ and the 7 5/8% notes due 2097 dipped over 2 points to 62.

The 5.65% notes due 2020 finished around 651/2, down a deuce, the trader said.

At another desk, a trader said the bonds were "down a good 3 points or so," seeing the 5.65% notes around 66.

Along with the equity drop, it was also reported Monday that credit default swaps on the Plano, Texas-based retailer's debt had pushed out to record wide levels.

The swaps were quoted at 30¼ bid, 31¾ offered.

Challenges for NII Holdings

Reston, Va.-based Nextel mobile phone service provider NII Holdings also received an equity downgrade on Monday.

Credit Suisse analyst Andrew T. Campbell cut his price target for the stock to $4.50 from $5 per share. Campbell cited "a more challenging outlook" for the company, as it looks to upgrade its service in Latin America amid high leverage levels.

A trader said the 10% notes due 2016 lost a deuce, ending around 90, as the 7 5/8% notes due 2021 fell over a point to 691/4.

Another trader pegged the 10% notes at 90, which he said was down a couple points.

As for the equity, the stock (Nasdaq: NIHD) declined 55 cents, or 9.77%, to $5.08.

The company is slated to publish earnings later this month.

RadioShack gets lifeline

Late in the day, it was reported that RadioShack had been given an $835 million lifeline from GE Capital in the form of a new loan.

The news resulted in a late-day pop for the 6¾% notes due 2019, according to traders.

One trader said the notes rose 4 to 5 points, ending in a 74 to 75 context. Another trader said the debt pushed up to the mid-70s from previous levels around 70.

He also called that 4 to 5 points better on the day.

The Fort Wroth, Texas-based electronics retailer is expected to use the funds to refinance outstanding bank debt. The new loan will be secured by existing assets.

A trader remarked that he believed the new facility would also give a small amount of liquidity to the company, something he opined it would need going into the holiday season.

Edison stays busy

A trader said Edison Mission Energy's bonds remained active Monday, following Friday's news that NRG Energy had made a $2.64 billion bid for the bankrupt power producer's assets.

The trader placed the bonds - which tend to trade on top of one another - at 71½ bid, 72.

Another trader quoted the debt at 71 bid, 72 offered, calling that "about where it was."

NRG is offering the Santa Ana, Calif.-based company $350 million of NRG common stock and the remainder in cash. NRG will also assume over $1.5 billion of Edison's non-resource debt.

The deal still has to be approved by the bankruptcy court, but if approved, closing is expected to take place in the first quarter of 2014.

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