J.C. Penney loses battle with Macy’s, bonds finish higher; Caesars mostly firm, 10% notes slip

By Stephanie N. Rotondo

Phoenix, June 16 – The distressed debt market began the week with a soft tone, especially as volume in the space was limited as investors focused on a slurry of M&A deals.

J.C. Penney Co. Inc. bonds were mostly higher Monday, even as a judge ruled against the Plano, Texas-based retailer in favor of Macy’s. The two had been battling in court over J.C. Penney’s home goods deal with Martha Stewart.

Caesars Entertainment Corp. debt was meantime also mostly higher, aside from its 10% second-lien notes due 2018. Earlier this month, the company received a notice of default on that indenture from a group of noteholders holding about 30% of the issue.

J.C. Penney mostly higher

J.C. Penney lost a court battle with Macy’s regarding its deal with Martha Stewart Living Omnimedia Inc.

A judge ruled in favor of Macy’s, giving it monetary damages and lawyers fees, but not punitive damages.

Despite the loss, J.C. Penney’s bonds were mostly better on the day.

A trader saw the 5¾% notes due 2018 rising 1¼ points to 92¼. The 7.65% notes due 2016 increased over half a point to 102 1/8.

However, the trader said the 6 7/8% notes due 2015 fell half a point to 101½.

Another market source pegged the 5.65% notes due 2020 at 88 bid, up almost a point on the day.

In December 2011, J.C. Penney announced that Martha Stewart Living had agreed to sell home good items in J.C. Penney stores. Come 2012, Macy’s – which had an exclusive contract with Stewart – sued. In October 2013, J.C. Penney revised its agreement with Stewart, eliminating products also sold by Macy’s.

J.C. Penney is considering appealing the ruling.

Elsewhere in the retail realm, a trader said Gymboree Corp.’s 9 1/8% notes due 2018 fell 1¼ points in a single trade to 73.

The bonds had run up last week, despite the company reporting a wider net loss.

Also weaker were Toys “R” Us Inc.’s 10 3/8% notes due 2017, which dipped a quarter-point to 86¾, according to the trader.

Caesars’ 10% notes fall

Caesars’ debt ended with a generally firm tone Monday, aside form the 10% notes due 2018.

A trader saw both the 8½% notes due 2020 and the 6½% notes due 2016 gaining half a point to 84 and 77 7/8, respectively.

However, he noted that the 10% notes were down 1¼ points at 39¾.

Another markets source saw the 10% notes at 40¼ bid, also down 1¼ points.

Earlier this month, the Las Vegas-based casino and hotel operator received a notice of default on the 10% notes from a group holding about 30% of the issue. The group alleged that a sale of four properties to a subsidiary was a fraudulent conveyance and that the company was looking to strip assets from bondholders.

Caesars has denied the allegations and deemed the notice meritless.

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