NII Holdings bonds bounce after earnings-induced decline, TXU up on interest payment

By Paul Deckelman

New York, Nov. 1 - Traders described activity in the distressed-debt markets as quiet, typical for a Friday afternoon.

However, they saw continued activity in three names which had also moved around during Thursday's session on news developments.

NII Holdings, Inc.'s bonds were seen having partially recovered some of the ground lost on Thursday, when the international wireless service provider's paper had slid badly after the company reported worse-than-expected third-quarter results.

The bonds of the electric utility and power generator formerly known as TXU Corp. continued an improving trend seen on Thursday, when the paper had risen on the news that the company's talks with its creditors had failed to reach agreement on the basis for a pre-packaged reorganization; the company instead said it would go ahead with plans to make a big interest payment that came due on Friday.

And J C Penney Co. Inc.'s bonds firmed after a Wall Street advisory firm raised its estimate for the troubled retailer's third-quarter sales

NII bounces after debacle

A trader said that "NIHD was active again," although it was "not nearly quite as active" as it had been on Thursday, after the Reston, Va.-based provider of wireless service to Latin America reported poor quarterly earnings, causing its bonds to swoon.

In Friday's dealings, "they rebounded a little bit," he said, seeing its 7 5/8% notes due 2021 trading up to around 60 bid, "so they were a little bit better."

On Thursday, those bonds had been among the busiest in the distressed world and the larger junk bond market, falling more than 6 points on the day to close around 59 5/16, on volume of over $39 million, according to another market source.

On Friday, the source said, those notes did push up over the 60 bid mark, only to fall back later on to end at 593/4, which was still up by 7/16, though on volume of only about $4 million, one tenth of Thursday's turnover.

NII's 10% notes due 2016 - which had likewise slid by more than 7 points on Thursday to end at 78 bid, on astounding volume of over $56 million, bounced back on Friday to close at the 79 bid mark - up on the day, though still well below the mid-80s levels at which those bonds had traded before getting cracked on the earnings report. Friday's volume of $11 million, while brisk, was still less than one fifth of what had been traded on Thursday, the market source said.

However, the company's 8 7/8% notes due 2019 failed to share in the comeback. Those bonds had fallen by some 5½ points on Thursday to 63½ bid, although the round-lot volume of over $6 million was well below that of the other issues. On Friday, that paper stayed at or below Thursday's levels all day before finally ending at 63 bid, actually down ½ point, on volume of over $12 million

For the third-quarter ended Sept. 30, NII posted a wider net loss of $299.9 million, or $1.74 per share, versus red ink of $82.4 million, or 48 cents per share, the year before.

Its operating revenue fell 22% to $1.1 billion.

Those results fell far short of Wall Street's expectations of a loss in the area of $1.17 per share on revenue of about $1.23 billion.

NII reported that it had net subscriber losses of 178,400 during the quarter - and warned that further subscriber losses are expected for the current fourth quarter.

NII said that its full-year adjusted operating income was likely to come in about $200 million below previous forecasts of $600 million to $650 million.

The company attributed its wider loss and subscriber losses to its attempts to upgrade its network to 4G. In doing so, NII was unable to migrate some of its Sprint Corp.'s iDEN network customers, which caused some of those customers to defect.

Interest payment boosts TXU

A trader said that TXU's paper was active, continuing to gain on the news that the Dallas-based electric utility operator and merchant power generating company - now known as Energy Future Holdings Corp. - was going to make a $270 million interest payment due on Friday, rather than file for bankruptcy.

He saw its 10% notes due 2020, issued by its Energy Future Intermediate Holding Co. unit, steady around the 105 area, helped by the news of the interest payment.

He saw the company's secured 11½% notes due 2020 trading around 73 bid, while its Texas Competitive Electric Holdings Co. 15% notes due 2021 were active around the 30½ bid level.

A second trader quoted the 15% notes "in the 30s," seeing the final trades of the day around 30¼ bid, which he called up 1 point from Thursday's level.

Earlier in the week, "those bonds had been trading down around 25 or 26 - so they're up by a couple" of points. He saw about $12 million traded.

He pegged the 10% notes somewhere between 104¼ and 1051/4, while the11½% notes were "actively traded," finishing "up a little" around 73 bid, 74 offered.

Its 11¼ bid notes due 2018 were about unchanged on the day at the 69 to 71 bid level.

The company's bonds had been among the most traded in Junkbondland on Thursday, given a big boost by the news that the company would not default on the $270 million Nov. 1 interest payment,

A market source saw that over $32 million of the 10% notes had traded on Thursday, finishing up by 1¼ points at 1051/4. On Friday, he said, over $8 million of the bonds had traded, although he saw the issue down 3/8 point at 104 7/8 bid.

He said that the 15% notes had risen by 2 5/8 points on Thursday, with over $45 million of the bonds changing hands. On Friday, he said the bonds rose by 1 point to 30¼ bid, though on still-brisk volume of $12 million.

Penney up on forecast

Elsewhere, a trader saw J.C. Penney's notes at better levels after a Wall Street advisory firm issued improved sales guidance for the underperforming Plano, Texas-based department store retailer.

He said that its 6 7/8% notes due 2015 had traded up to the 87 bid level, while its 5¾% notes due 2018 had risen to 781/2.

He saw Penney's 5.65% notes due 2020 "up another point," to around the 76 bid level.

At another desk, those bonds were quoted up maybe ¼ point on the day at 75¾ bid. The 53/4s were seen having risen by as much as 2¼ points to go home at 78½ bid - but traders there said the 6 7/8% notes were quoted down about 7/8 point at just over 85 bid.

Penney's New York Stock Exchange-traded shares meantime jumped by 64 cents on the session, or 8.53%, to end at $8.14. Volume of 56 million shares was 40% above the norm.

The shares, and the bonds as well, got a boost after ITG Investment Research lifted its sales forecast for the department store chain, citing "improving sales trends" in five of the last seven weeks.

It now forecasts that comparable-store sales by stores open at least one year - the retailing industry's key measure of operating performance - will only be down by 4% from a year earlier during the third quarter, rather than its earlier forecast of a 6% drop.

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