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Bon-Ton Debt Rises to Four-Month High as CEO Projects Profit

Bon-Ton Stores Inc.’s bonds rose to the highest in four months as the retailer projected that it would generate as much as $70 million of cash this year.

Bon-Ton’s $480 million of 10.25 percent notes due in March 2014 rose 5.8 cents to 72.8 cents on the dollar to yield 29.1 percent as of 2:02 p.m. in New York, the highest price since November, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. There were 48 trades of at least $1 million of the security today, the most of any U.S. bond, Trace data show.

Bon-Ton, which has department stores in the U.S. Northeast and Midwest, is seeking to lure new customers with trendier clothes as it tries to make enough money to pay off or refinance its debts before they come due in two years. In January, the chain appointed Brendan Hoffman, the former head of Lord & Taylor LLC, as chief executive officer.

The York, Pennsylvania-based retailer said today in a statement that it expects to produce $60 million to $70 million of free cash flow this year. Net income fell to $78.2 million in the fourth quarter from $85 million a year earlier, the company said.

Bon-Ton also said that it bought back $16 million of the bonds in January after repurchasing $30 million in November. Its stock soared 33 percent to $6.98, the highest price since August.

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