Energy names off as crude fall resumes; Windstream struggles again; Penney pops on numbers

By Paul Deckelman

New York, Nov 10 – Traders in distressed debt and the bonds of other underperforming saw another mostly down market on Friday, in line with an overall retreat seen in the broader high-yield bond market.

Energy issues such as California Resources Corp., MEG Energy Corp. and EP Energy Corp. were all down as world crude oil prices reverted to their losing ways Friday after strengthening on Thursday.

Telecommunications operator Windstream Holdings Inc.’s recently priced secured notes issue continued to trade multiple points below its already discounted issue price and its existing notes were also lower.

But several names recently under pressure were seen better on Friday, including J.C. Penny Co. Inc. The retailer’s lately beleaguered notes got a boost when quarterly numbers showed a smaller than expected loss and an unexpected same-store sales gain.

Sprint Corp. notes, recently in retreat after the failure of the wireless provider’s merger talks with rival T-Mobile (US) Inc., were also seen rebounding on the day.

Windstream struggles again

A trader saw continued deterioration in Windstream Holdings’ 8 5/8% first-lien notes due 2025, quoting the issue falling below the 95 bid level on Friday into a 94¾ to 95½ bid range, with around $10 million of volume.

Windstream, a Little Rock, Ark.-based provider of wireline and broadband telecommunications service, priced $400 million of those notes at 99 on Monday, yielding 8.802%, after the deal was upsized from an originally announced $250 million.

The offering was structured as an add-on to a new series of 8 5/8% secured notes that Windstream plans to give to holders of some of its existing debt in an ongoing exchange offer.

Traders said that the issue struggled “right out of the chute” after pricing on Monday, falling below its issue price and then plunging more than 2 points on Tuesday in active trading down to the mid-96 level and still continuing to lose ground after that.

A trader meantime said that Windstream’s existing 6 3/8% notes due 2023 were off by ½ point on Friday, finishing at 68½ bid.

Energy names off

Traders said that energy names were generally lower on Friday, in line with a renewed fall in world crude oil prices.

Los Angeles-based oil and natural gas exploration and production company California Resources’s bellwether 8% notes due 2022 eased by 1/8 point to 73 bid, with around $14 million having traded.

Another trader, though, saw them about unchanged in a 72¾ to 73¾ bid range.

Houston-based based EP Energy’s 8% notes due 2025 slid by 7/8 point to end at 70½ bid on volume of more than $11 million.

Also in the energy patch, Calgary, Alta.-based MEG Energy’s 7% notes due 2024 were seen by a market source down 1½ points on the day at 90¼ bid.

The issues softened as world crude oil prices were in retreat on Friday after having risen on Thursday for the first time after two consecutive losses before that.

West Texas Intermediate crude for December delivery, the benchmark U.S. crude oil grade, lost 43 cents per barrel in Friday trading on the New York Mercantile Exchange, settling in at $56.74.

The key international grade, North Sea Brent for January delivery, ended down 41 cents per barrel in London futures trading Friday, at $63.52 bid.

Penney paper pops after data

Some recently challenged names were seen on the upside on Friday.

A trader said that J.C. Penney “had some decent numbers out” and that pushed the Plano, Texas-based department store operator’s recently underperforming bonds up in Friday dealings.

He saw Penney’s 5.65% notes due 2020 jump 2¼ points on the day to end at 89¼ bid, on round-lot volume of around $6 million, plus numerous smaller odd-lot transactions as well.

Its 5 7/8% notes due 2023 were ¾ point better on the day, ending at 92¼ bid, with around $4 million traded.

The company’s long bond – its 7 5/8% notes due 2097 – gained more than a deuce on the day to end at 59¼ bid, “on a couple of trades,” the trader said.

Penney reported third-quarter results which included an unexpected 1.7% rise in same-store sales, that is, stores which have been open for at least a year, a key retailing industry performance metric. Heretofore, Penny had reported same-store sales declines over a number of quarters.

The company also said that its net loss widened to $128 million, or 41 cents per share, from year-ago red ink of $62 million, or 22 cents per share – but the third quarter loss was less than what analysts had been expecting.

J.C. Penney’s New York Stock Exchange-traded shares rose in tandem with its bonds, jumping by 42 cents, or 15% on the day, to close at $3.17.

Sprint runs up

Elsewhere, Sprint paper – which had retreated earlier in the week after the Overland Park, Kan.-based wireless operator announced that its lengthy recent talks with rival cellphone company T-Mobile had failed to result in any kind of strategic transaction between the two – was seen finishing the day better.

Its 6 7/8% notes due 2028 closed at a par bid, up ¼ point, with over $17 million traded.

Sprint’s 7 7/8% notes due 2023 did even better, up nearly ½ point on the day, ending just below the 107 bid level as more than $10 million of that issue changed hands.

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