AmerenEnergy bonds jump 20 points on sale news; J.C. Penney rally ends; Travelport busy

By Stephanie N. Rotondo

Phoenix, March 14 - The day's big mover was AmerenEnergy Generating Co., as the company's bonds jumped about 20 points on news of the sale of its merchant generating business.

Ameren said in January that it was looking to get out of the merchant power business in order to focus on its regulated utilities. The merchant business had proved to be a drag on the company's bottom line, and Ameren thusly reported a loss in its most recent quarterly filing.

Though the company will not receive any actual funds from the sale, it will shed $825 million of debt.

Meanwhile, J.C. Penney Co. Inc.'s bonds saw a recent rally come to a halt on Thursday. The retailer was in the news again, as CIT Group Inc. said it was going to begin enforcing a surcharge on the company's invoices.

Travelport LLC continued to be active, though gains in the 9 7/8% notes due 2014 stopped. The 11 7/8% notes due 2016, however, were on the rise.

Ameren gets boost on sale

AmerenEnergy announced Thursday that it was selling its merchant generating business to Dynegy Inc.

The official sale agreement comes after the company said it was looking to divest the asset back in January.

"I guess that's good news for them; the bonds are flying," a trader remarked, seeing the 7% notes due 2018 jump to 76¾ from previous levels around 55.

"They were the most notable distressed mover," another trader said, pegging the 7.95% notes due 2032 at 72 versus previous trades in a 52-53 context.

Ameren will not receive any cash from the sale but will shed $825 million of debt. The company also expects to receive about $180 million in tax benefits.

The full benefits are expected to be seen by 2015.

"We think all of this is very good news, giving the business time to recover as industry-coal fired capacity is retired and increased demand increases natural gas prices, making surviving coal plants more profitable," wrote Gimme Credit LLC analyst Philip C. Adams in an afternoon comment, noting it was "a very good outcome for Genco bondholders."

J.C. Penney changes direction

J.C. Penney's 7 1/8% notes due 2023 saw a recent rally come to an end on Thursday, as traders saw the bonds slipping as much as a point.

One trader placed the debt at 981/2. Another saw the issue in a 981/4-98½ context, which was down from previous highs around 99.

"They were a little bit off the top," the second trader said.

On Thursday, it was reported that CIT Group intended to start a 1% surcharge on all of the Plano, Texas-based retailer's invoices. Such a charge is an indication of a perception of greater risk.

Just last month, the company reported dismal quarterly and yearly results and a nearly $1 billion annual cash burn.

Total sales dropped 25%.

Rumors have been circulating that Ron Johnson, chief executive and creator of a yet-to-be-successful turnaround plan, was planning to exit his post, though the company has called such a charge false. Still, J.C. Penney has been hit with a bevy of downgrades and not many are optimistic about results going forward.

"After last year, Penney has got a long way to go just to get back to even," wrote Carol Levenson, an analyst with Gimme Credit LLC, in a morning report put out Thursday.

Travelport still active

Travelport remained an active name in the distressed realm, though gains in the 9 7/8% notes came to an end.

A trader said the issue was unchanged at 101.

The 11 7/8% notes, however, were more active and saw a 4-point increase on the day.

The trader placed that issue at 84.

Another trader called the paper up 4 points at 831/4.

On Tuesday, the Atlanta-based travel services provider said that bondholders had agreed to a plan that swaps their debt for new 13 7/8% notes due 2016 or floating-rate notes due 2016, plus cash.

The company also reached an agreement with its PIK-loan lenders to swap the debt for equity.

Travelport also reported quarterly results on Tuesday. Though the company more than doubled its loss to $171 million - compared to $84 million the previous year - the results were in line with expectations.

Distressed names firm

Elsewhere in the land of distressed debt, a trader saw Caesars Entertainment Corp.'s 10% notes due 2018 inching up to 663/4.

He also said that Clear Channel Communications Inc.'s 10¾% notes due 2016 were 1½ points better, ending around 76.

And, NII Capital Corp.'s bonds continued to firm, with the 7 5/8% notes due 2021 and the 10% notes due 2016 both up a point at 71¾ and 921/4, respectively.

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