Alcatel-Lucent to raise fresh capital, bonds improve; Exide settlement with California allowed

By Stephanie N. Rotondo

Phoenix, Nov. 4 - Topical distressed bonds were moving up during Monday trading, according to traders.

Alcatel-Lucent paper firmed after the company said it was planning to raise about $2 billion in order to power up its restructuring plan. Of the capital raise, $750 million will come from a new high-yield bond issue.

Meanwhile, Exide Technologies Inc. received court approval on its settlement agreement with California's state environmental agency. Under the terms of the agreement, Exide will be able to keep its Vernon, Calif.-based recycling plant online while it makes capital improvements on the site.

J.C. Penney Co. Inc.'s debt continued to drive upward. On Friday, the company's stock was upgraded by ITG Investment Research, which helped the bonds pack on a few more points. But a trader pointed out that the bonds had been inching higher even before that, noting that there are some in the market who consider the debt a good deal.

Alcatel boosted by capital plan

Paris-based telecommunications company Alcatel-Lucent announced a capital-raise plan on Monday aimed at cutting debt and helping the company turn itself around.

"They were better on the day," a trader said of the bonds after the news. He said the 6.45% notes due 2029 hit a high note around 90, but went out in an 89 to 90 context.

Another market source pegged the issue at 89½ bid, up almost a point on the day.

According to the plan, Alcatel will sell $1.3 billion of its euro-denominated stock and then another $750 million of high-yield bonds. Upon completion of both offerings, the proceeds will be used to repay 2014 and 2015 maturities.

The company has also secured a commitment for a new €500 million loan.

Exide settlement approved

Exide Technologies' 8 5/8% notes due 2018 "keep moving up," a trader said Monday.

He pegged the bonds at 79 bid, 80 offered, which compared to trades with a 78 handle last week.

Another trader said the debt improved by nearly a point, closing at 78 7/8.

The gains came as the U.S. Bankruptcy Court for the District of Delaware approved a settlement plan the company had come to with California's Department of Toxic Substances Control regarding its Vernon, Calif.-based recycling plant.

The plant had been shuttered earlier this year after regulators found a toxic leak coming from the plant. An administrative judge allowed the plant to reopen while the company worked with the state on a settlement agreement.

The agreement will allow Exide to make necessary capital improvements on the site while staying open for business. The Milton, Ga.-based battery maker had also agreed to provide funds for county residents to have blood tests related to the previous leak, among other things.

J.C. Penney surge continues

A trader said J.C. Penney bonds saw "nice-sized moves" during the first trading session of the week.

He saw the 6 3/8% notes due 2036 at 70 5/8, which was only marginally stronger. However, the 6 7/8% notes due 2018 gained over 4 points, he said, ending at 891/2.

The 7.4% notes due 2037 meantime improved by over 2 points at 711/4, the 5.65% notes due 2020 rose over 1½ points to close at 78 1/8 and the 7.95% notes due 2017 were 1½ points better at 841/2.

At another desk, a trader said the long-dated paper was "trading north of 70," while the 6 7/8% notes had moved up to 891/2.

On Friday, ITG Investment Research upgraded its rating on the company's stock, which helped the bonds firm during that session. However, the second trader noted that the paper had been on the rise even before that.

"There is talk of sales being better," he said by way of explaining why the previously pressured debt was suddenly gaining strength. He said that there are some players in the market who have been calling the bonds a "buy" at current levels.

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