J.C. Penney rebounds from Friday lows; Dex One, SuperMedia file for bankruptcy, to push merger

By Stephanie N. Rotondo

Phoenix, March 18 - The distressed debt market started the week with subdued trading, though most things were on the firm side.

"It was a very slow day, a very low volume day," said one trader who was speaking of the broader high-yield space.

Another trader said, "It seemed like everything was trending a little bit higher."

The second trader opined that the lack of activity was due in part to headlines coming out of Cyprus regarding its European Union bailout. The EU has said it will help bail out the island nation's banks, but only if it imposes a tax on bank depositors.

"I think that gave the market a bunch of pause," the trader said, noting that there was "some risk involved with some European fallout."

J.C. Penney Co. Inc. bonds saw light trading, though the debt did end on a high note. A trader remarked that the company's stock was "up smartly" on the back of reports that the company's new "Joe Fresh" line was being met with a positive response.

Meanwhile, Dex One Corp. announced it had filed a pre-packaged bankruptcy. The filing is being done in order to facilitate a merger with SuperMedia Inc.

A trader said the company's bonds were holding steady, but noted that its stock was ending higher.

Elsewhere in the marketplace, ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 continued to tick up as an auction of assets draws near.

"There may be speculation that some buyers will poke their heads up," a trader said, pegging the notes in a 6 to 6¼ context.

The trader also saw that AmerenEnergy Generationg Co.'s debt had "drifted a bit lower," after running up last week on news the company was selling its merchant generating business to Dynegy Inc.

The trader placed the 7% notes due 2018 at 73 and the 6.3% notes due 2020 around 68.

J.C. Penney rebounds

J.C. Penney continued to make headlines on Monday, as Oppenheimer & Co. released a report that said the retailer's new "Joe Fresh" line was being met with positive response.

ISI Group meantime said the company could unlock value via subletting or selling retail spaces.

"In general, the bonds were better," a trader said of the Plano, Texas-based company's debt. He saw the 5.65% notes due 2020 rising to "north of 80," versus previous levels in the high-70s.

The trader also saw the 7.4% notes due 2037 "straddling 80."

Another trader called the 5¾% notes due 2018 up nearly a point at 85. He added that the stock was "up smartly."

The stock (NYSE: JCP) rose 96 cents, or 6.2%, to $16.44.

Dex files for bankruptcy

Dex One was another issuer that saw its stock up decently, but little movement in the bonds.

A trader said the company's bonds were unchanged - the 12% PIK notes due 2017 were holding in a 431/2-44 context - but the stock was stronger.

The equity (NYSE: DEXO) gained 24 cents, or 11.37%, ending at $2.35.

The Cary, N.C.-based phonebook publisher announced on Monday that it had filed a pre-packaged bankruptcy plan. The filing was expected, as the company said it might do so last year when it was announced that it would merge with SuperMedia.

SuperMedia also filed for Chapter 11 protections.

Both companies had hoped to avoid the bankruptcies, however. Originally, they had hoped to win the full support of senior secured lenders in order to amend a credit agreement that was required to allow the merger to proceed.

The amendment would have extended the maturity of the debt to Dec. 31, 2016.

The companies are now hoping the bankruptcy court will facilitate the merger.

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