Worries about Greece, Puerto Rico weaken distressed bonds; CalRes remains under pressure

By Stephanie N. Rotondo

Phoenix, June 29 – A looming Greek default – and possibly one in Puerto Rico – weighed heavily on distressed debt on Monday.

“Plenty of the dicier names were down 1-plus points,” a trader said.

One such name was Verso Paper Corp., whose 11¾% notes due 2019 dropped over 3½ points to 57 1/8.

Those bonds have been softening of late, though there hasn’t been any fresh news since earlier in the month when the Memphis-based papermaker appointed a new chief financial officer.

As for the day’s notable news, debt talks between Greece and the E.U. fell apart over the weekend.

One other big story of the day was Puerto Rico. Over the weekend, the U.S. territory’s governor, Alejandra Garcia Padilla, said the island is unable to repay debt to the tune of $72 billion. That news sent the territory’s benchmark bonds – the 8% notes due 2035 – down into the high-60s from the high-70s, a trader reported.

Meanwhile, news out of China was also weighing on the markets, as the country cut interest rates over the weekend in order to outweigh a huge market loss on Friday.

In trading, California Resources Corp.’s bonds “continued their slide,” according to a trader. The debt began to drift down on Friday, after a well-known short-seller deemed the company’s stock as worthless and said a debt restructuring was needed.

However, the coal sector was getting a boost after the Supreme Court ruled that the Environmental Protection Agency needed to take financial implications into account when handing down new emissions rules.

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