J.C. Penney bonds gain ahead of credit facility launch; Quiksilver posts earnings, debt tanks

By Stephanie N. Rotondo

Phoenix, June 3 - The distressed debt market saw activity levels increase a bit on Tuesday, helped in part by fresh news that drove some names higher or lower.

J.C. Penney Co. Inc., for instance, was on the rise. The company said Tuesday that it was launching a new $2.35 billion credit facility on Thursday.

Meanwhile, Quiksilver Inc. released disappointing earnings late Monday and come Tuesday trading, the bonds were down significantly.

One trader said the debt was down as much as 14 points on the day. The stock also took a beating.

Among the "usual suspects," Caesars Entertainment Corp.'s bonds were mostly higher, though on no fresh news. The coal arena, however, remained under pressure.

J.C. Penney boosted

J.C. Penney is slated to launch a new $2.35 billion credit facility on Thursday, the proceeds of which will go toward refinancing a current credit facility and for general corporate purposes.

Investors seemed to take that news as a positive, as the bonds were moving up.

"They just keep kind of creeping higher," a trader said.

The trader pegged the 5¾% notes due 2018 at 91 and the 5.65% notes due 2020 at 87.

Another trader said the 2018 paper was "up about a point" at 911/4, while the 2020 bonds put on just over a point to close at 87.

Yet another market source pegged the 5.65% notes at 87¼ bid, up 1¼ points.

The Plano, Texas-based retailer's new credit facility is expected to consist of a $500 million term loan and a $1.85 billion asset-based revolver.

Bank of America Merrill Lynch, Wells Fargo Securities LLC, J.P. Morgan Securities LLC, Barclays and Goldman Sachs Bank USA are the lead banks on the deal, with Bank of America the left lead on the term loan and Wells Fargo the left lead on the revolver.

Quiksilver posts wider loss

Clothing manufacturer Quiksilver's plan to increase profitability apparently hit a snag as second-quarter results disappointed investors.

On the back of the earnings release late Monday, the company's bonds - and stock - took a massive hit come Tuesday trading.

A trader said the 7 7/8% notes due 2018 "rebounded a little bit from the lows," but still ended down 5 points in a 103 to 103½ context. The 10% notes due 2020 dropped 13 to 14 points, he said, ending around par.

The stock (NYSE: ZQK) closed down $2.38, or 41.11%, to $3.41.

For the second quarter, the Huntington Beach, Calif.-based company reported a net loss of $53.1 million, or 27 cents per share. That compared to a loss of $32.4 million, or 20 cents per share, the year before.

Revenues fell 11% to $408 million.

Analysts were expecting a loss of 2 cents per share on revenues of $448.8 million.

Total wholesale revenue was down 15%, but e-commerce sales increased 23%.

Last year, Quiksilver unveiled a plan to boost profitability by cutting costs and focusing on its core brands, such as its namesake brand and Roxy. However, given the quarter's dismal results, the company said it would take longer to realize its goal.

Caesars firms

A trader saw Caesars Entertainment's debt finishing the session mostly higher.

He said the 8½% notes due 2020 and the 9% notes due 2020 were up half a point to three-quarters of a point at 811/2.

But the 11¼% notes due 2017 were unchanged at 891/2.

Another market source saw the 10% notes due 2018 closing up half a point at 43½ bid.

Caesars is a Las Vegas-based casino and hotel operator.

Coal stays soft

Coal names remained weak in Tuesday trading, traders reported.

One trader said Walter Energy Inc.'s 8½% notes due 2021 were unchanged at 521/2, though Alpha Natural Resources Inc.'s 6% notes due 2019 slipped half a point to 70.

A second trader said Walter's debt "continued to slip," seeing the 8½% notes ending with a 51 handle. The 11½% PIK notes due 2020 finished around 76.

A third source saw Alpha Natural's 6¼% notes due 2021 at 68 bid, off over 3 points on the day.

For its part, Alpha Natural saw its senior notes upgraded to "neutral" from "sell" by Citigroup Inc.

In the report, Citi analyst Richard Yu said that current capacity cuts could lead to higher prices in the near future.

"We believe the higher prices, coupled with ANR's strong liquidity position, means that the company's senior notes have limited downside from current levels in the near/medium term," Yu wrote.

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