H/2 Capital Partners is seeking to sell almost $800 million of a $1.7 billion loan made to J.C. Penney Co., Bloomberg News reported. The potential transaction was large enough to spook bondholders and traders in the market for credit-default swaps tied to the retailer. Deutsche Bank AG is shopping the J.C. Penney’s first-lien term loan due in 2023 on behalf of the hedge fund. The debt, which will be sold at auction, is being marketed at a potential price of around 87 cents on the dollar, a slight discount from current trading levels of around 89 cents. The retailer’s first-lien bonds due 2023 slipped over 4 cents on the dollar on Thursday to as low as 81.5 cents before recovering to 84.25 cents on Friday, according to Trace bond trading data. The cost of protecting J.C. Penney debt in the credit-default swaps market for one year rose as much as 7 percentage points upfront intraday to 23.5 points on Thursday, before falling back to 17.7 points on Friday. Plano, Texas-based J.C. Penney has been focusing on managing its debt load as it seeks to turn around its operations.
