Overseas Shipholding sinks on income estimates; J.C. Penney debt weakens as new capital sought

By Stephanie N. Rotondo

Phoenix, Sept. 23 - Monday saw thin trading in the whole of the high-yield bond market, but news was pushing some more distressed names around.

One trader noted that there were "only a handful of double-digit trades."

But as for topical items, Overseas Shipholding Group Inc. paper dropped 3 to 4 points on the day. On Friday, the bankrupt ocean freight company filed income projections for the next five years. The figures did not please investors.

Meanwhile, J.C. Penney Co. Inc. bonds were slightly lighter as it was reported the struggling retailer was looking to raise more capital.

In the emerging market arena, OGX Petroleo e Gas Participacoes SA was continuing to weaken. The bonds had begun to dip Friday when the Brazilian oil company said it had fired its chief financial officer. On Monday, the company said it had filled the post.

Overseas Shipholding debt sinks

A trader said that Overseas Shipholding Group's bonds came in after the company "came out with some summary projections that were disappointing."

He said the 8 1/8% notes due 2018 fell 3 to 4 points, trading in an 89 to 90 context.

Another trader also said the debt was off 3 to 4 points, the 8 1/8% notes around 90 and the 7½% notes due 2024 around 891/2.

For its U.S. fleet, the company indicated that pre-tax vessel cash flows would decline over the next five years. In fact, based on the company's projections - which were filed with the Securities and Exchange Commission on Friday - cash flows would go negative in 2016 and 2018, only to come out slightly in the black by 2018.

However, for the international fleet, cash flows are expected to climb up over the next five years.

J.C. Penney looking for cash

J.C. Penney debt was weaker but not overly active in Monday trading, even on the heels of a news story out late Friday that claimed the Plano, Texas-based retailer was in talks to raise fresh capital.

One trader called the 7.4% notes due 2037 off three-quarters of a point at 72, while the 7.95% notes due 2017 fell a deuce to 901/2.

Another trader said the 2037 paper was "maybe a little bit lower," calling it down a point around 72.

Reuters reported late Friday that the troubled company was working with Goldman Sachs to come up with a plan to find new money. The article cited "a source familiar with the matter" as saying that the company had already begun the early stages of negotiations with banks and other institutional investors.

Also on Friday, it was reported that Vornado Realty Trust had sold off its entire stake in J.C. Penney for $13 per share.

OGX names new CFO

OGX announced Monday that it had installed Paulo Narcelio Simoes Amaral as its new chief financial officer and investors relations director.

Amaral is replacing Roberto Bernardes Monteiro, whom the company said on Friday the board of directors had fired.

One trader said the company's debt was quiet on the news, but another said the 8½% notes due 2018 had fallen "another point" to 18 7/8.

The second trader noted that the bonds had been trading in the low-20s mid-last week.

The game of CFO musical chairs comes as the debt-ridden company looks to restructure its debt. Chatter has it that the firing and hiring of a new CFO could put a damper on any restructuring talks.

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