Distressed debt activity muted; J.C. Penney's fall continues; James River gets a boost

By Stephanie N. Rotondo

Phoenix, Feb. 5 - Another bout of cold, snowy weather hit the East Coast and parts of the Midwest on Wednesday, resulting in "limited participation" in the distressed bond market, a trader said.

"I wouldn't say there was a lot going on with the weather," he noted.

The market was also trending toward the softer side during midweek trading.

J.C. Penney Co., Inc. continued to lose steam after releasing same-store sales results on Tuesday. Though the retailer did see a gain year over year, the increase was less than anticipated.

The coal sector also remained under pressure, though James River Coal Co. inched up a touch. The company said earlier in the week that it had hired restructuring advisers to help it deal with its debt.

NII Holdings Inc., however, continued to edge higher following news from Monday regarding the launch of a push-to-talk app launched for the iPhone.

"Those continue to be better," a trader said, seeing the 8 7/8% notes due 2019 at 57½ and the 10% notes due 2016 in a 66½ to 67 zip code.

Another trader pegged the 8 7/8% notes at 571/2, which he said was a point better on the day. The 10% notes were seen slipping just a touch to 66 7/8.

J.C. Penney slips again

J.C. Penney's bonds remained weak Wednesday following the company's disappointing same-store sales release on Tuesday.

A trader saw the 5.65% notes due 2020 dropping half a point to 681/2. However, he said the 6 3/8% notes due 2036 managed to edge up a bit to 64 5/8.

Another trader saw the 5.65% notes hit a low of 67, though he added that most of the day's trades took place between 67 and 68.

"It continues to trade down," he said.

A third market source pegged the 5.65% notes at 67 bid, down a deuce.

J.C. Penney reported same-store sales for the fourth quarter on Tuesday. Though the Plano, Texas-based retailer posted a 2% gain in sales, analysts polled by Bloomberg had anticipated a 4.1% increase.

The quarter included the heavily depended upon holiday season. The company had previously said that it was "pleased" with the results from that time period. Sales during those nine weeks - November through December - were up 3.1% year over year.

Also in the world of retail, Logan Roadhouse Inc.'s 10¾% notes due 2017 lost nearly a point to end around 661/2, according to a trader.

The trader also saw Toys "R" Us Inc.'s 7 3/8% notes due 2018 falling a touch to 743/4.

More pressure for coal

A trader said that "coal names weren't very active" in Wednesday trading, but they continued to be generally under pressure nonetheless.

However, James River Coal's 7 7/8% notes due 2019 managed to tick up a bit, with one trader seeing the issue around 18 bid, 18½ offered. That was "up a little bit from yesterday's levels," he said.

Another trader said the paper was "still trading in the teens," placing the issue at 181/2, flat, or without accrued interest. Though there was "very limited trading" in the notes, they were still up from the previous day's lows "of 15 or 12."

On Monday, the company said it had hired Perella Weinberg Partners LP as restructuring advisers.

The company previously filed for Chapter 11 protection in 2003 and emerged in 2004. It has not turned a profit since 2010.

Elsewhere in the space, Arch Coal Inc.'s 7¼% notes due 2021 lost a point to close at 741/2.

The St. Louis-based coal producer released its fourth-quarter results on Tuesday, showing a wider loss as metallurgical coal prices fall.

For the quarter, net loss was $371.2 million, or $1.75 per share. When adjusted for one-time items, the loss was 45 cents per share.

Analysts had been expecting 39 cents per share.

The fourth quarter's loss compared to a loss of $295.5 million, or $1.39 per share, the year before.

Revenue declined 17% to $719.4 million. FactSet analysts had predicted revenue of $767 million.

For the year, net loss was $641.8 million, or $3.03 per share. Revenue was $3.01 billion. In 2012, the yearly total loss was $684 million, or $3.24 per share, on revenue of $3.8 billion.

But the company did note that it had upped its liquidity during the last quarter of 2013, ending with $1.4 billion.

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