NII, J.C. Penney bonds soften ahead of earnings; Verso comes in after exchange offer concerns

By Stephanie N. Rotondo

Phoenix, Feb. 21 - A distressed bond trader said, "The market is strong," though another lamented on Monday that there was "not too much going on."

Still, the week could get hopping, with earnings due out from NII Holdings Inc. and J.C. Penney Co. Inc.

NII Holdings' numbers will come out Friday and J.C. Penney is scheduled to release quarterly results on Wednesday. As investors prepare for the announcements, the bonds were trending toward the softer side.

Meanwhile, Verso Paper Corp. bonds were "pretty much unchanged" to down 3 points, according to a trader.

The trader pegged the 8¾% notes due 2019 at 531/2, down on the day, while the 10% notes due 2016 held in around 65.

On Friday, Verso again extended an exchange offer that is being done in connection with its planned merger with NewPage Corp. Verso has already warned that the exchange offer might not be done with enough participation to satisfy the terms of the deal. In order for the deal to be clinched, 85% of both the 8¾% notes and the 11 3/8% notes due 2016 must be tendered. For its part, NewPage is not backing down, stating Friday that it would not amend the terms and that if not satisfied, it would review its other options.

NII, Penney prepare earnings

Both NII Holdings and J.C. Penney are slated to put out earnings this week. Ahead of the releases, both companies saw their bonds trickling downward.

One trader saw NII's 8 7/8% notes due 2019 slipping about half a point to 53 5/8. That same trader also saw J.C. Penney's 7.4% notes due 2037 dip half a point to 661/2, while the 5.65% notes due 2020 declined almost a point to 71.

Another market source pegged the 5.65% notes at 70¾ bid, down 1½ points on the day.

At another desk, a trader said NII's paper was "lower, but not super active." He saw the 7 5/8% notes due 2021 closing around 45½ and the 11 3/8% notes due 2019 around 81.

Fannie, Freddie mostly higher

Fannie Mae and Freddie Mac preferreds were mostly firm on Monday, following Fannie's fourth-quarter earnings release on Friday.

Fannie reported net income of $6.5 billion for the fourth quarter.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were 5 cents weaker on the day at $10.35. However, the 8.25% series T noncumulative prefereds (OTCBB: FNMAT) rose 8 cents to $11.47.

Sector peer Freddie saw its 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) rise a dime to $10.70.

For the year of 2013, Fannie's net income was $84 billion.

Because of a revised agreement related to its 2008 bailout, Fannie is required to pay out a portion of its profit to the federal government. As such, the mortgage giant plans to make a $7.2 billion dividend payment.

In doing so, Fannie will have finally repaid taxpayers the $116.1 billion it took in bailout funding.

For its part, Freddie took $71.3 billion in bailout dollars.

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