Sears paper off on exchange offer news; Claire’s lags; Frontier still busy, but mixed; Intelsat gains

By Paul Deckelman and James McCandless

New York, Jan. 23 – On what traders in distressed debt and in notes and bonds of underperforming companies and sectors were calling an otherwise slow day in that market Tuesday, Sears Holdings Corp. announced a plan that would help reduce some of its outstanding debt, causing the affected notes to trade sharply downward on the day. Traders described the move as part of a continuing effort by the embattled retailer to prevent bankruptcy.

Out of that same sector, Claire’s Stores Inc.’s notes trended downward on the announcement that it would examine its capital structure with the help of investment firm Lazard as part of an effort to achieve long-term stability.

In the telecom sphere, trading in Frontier Communications Corp. remained at high volume, continuing the recently intense activity spurred by the news that the wireline service provider’s recently announced amendments to its credit agreement had been finalized, though Tuesday’s results were mixed from note to note, according to traders.

Intelsat SA’s several series of notes from its Luxembourg and Jackson subsidiaries were seen higher across the board, though on no specific news about the communications satellite company.

Sears off on exchange offer

Sears Holdings Corp. announced that it would be offering private exchanges for its 6 5/8% notes due 2018 and 8% notes due 2019 that would make them convertible into common stock. The new notes would be optionally convertible by the holders and mandatorily convertible if the price of the company’s common stock rose above $10.

The company will also seek to amend a term loan to allow payment in kind, rather than cash interest (see related story elsewhere in this issue).

According to a trader, most of the bonds affected by the exchange offer are held by Sears chief executive officer Edward Lampert’s investment fund, ESL Investments Inc. and by Fairholme Capital Management.

In a news release, the Hoffman Estates, Ill.- based retailer – operator of the iconic Sears and Kmart department store chains – said that the deals are intended to strengthen liquidity and decrease interest expenses

“They are doing everything that they can to stave off bankruptcy,” the trader said. “They are going to keep kicking the can down the road, doing exchanges and putting band-aids on the cap structure to keep themselves alive.”

The trader said that the news caused the 2018 notes to trade down some 3 5/8 points, to 83 3/8 bid, while the 2019 notes fell more than 2 points on the day to just under 48 bid.

Claire’s off on Lazard move

Also in the retailing sector, the Monday announcement that Claire’s Stores Inc. would retain Lazard as its investment banker tasked with evaluating a capital structure solution for the company was seen as the likely catalyst as its 8 7/8% notes due 2019 traded down around ½ point to just under 21 bid.

In a news release, CEO Ron Marshall said that the move ensures the long-term success of the company, a specialty retailer of girls’ and women’s jewelry and accessories, based like the unrelated Sears in Hoffman Estates, Ill.

“We believe this is the right time to undertake this initiative and we want to assure our vendors, employees and stakeholders that we believe we have ample liquidity to honor our commitments through the completion of this process,” Marshall said.

Frontier stays active

Elsewhere, continuing the trend seen in in recent weeks, Frontier Communications Corp.’s notes were among the most actively traded of the day Tuesday despite not changing much in price.

Since finalizing amendments to its credit agreement, the Norwalk, Conn.-based wireline telecommunications firm’s notes have remained highly active, according to a trader, citing its 10½% notes due 2022 rising slightly to around 83 5/8 bid, although its 11% notes due 2025 eased by ½ point to end the day at 77¾ bid.

Volume was $21 million and $16 million, respectively.

“They’ve traded up a good bit since the amendment news,” the trader said.

Intelsat issues up

Also in the communications sphere, Intelsat Luxembourg SA’s and Intelsat Jackson Holdings SA’s notes were also heavily traded Tuesday, and moved higher

Intelsat Luxembourg 7¾% notes due 2021 were the main driver, trading up more than 2½ points on the day to end at 48 5/8 bid, with over $17 million having traded, followed by the unit’s 8 1/8% notes due 2023, up more than 3 points to 45 1/8 bid, with around the same volume.

Intelsat Jackson’s 7¼% notes due 2020 traded up over a point to 88½ bid, with over $26 million having changed hands.

A trader said that the high volume of trades in the Luxembourg-based satellite communications company’s paper was not due to any particular news, but just an indicator of the market as a whole.

“Bonds have been soft for a week and a half,” the trader said. “There had been a fair amount of sell pressure – but it looks like today, somebody decided to start buying, hence the move upward.”ere seen higher across the board, though on no specific news about the communications satellite company.

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