Distressed debt suffers amid broad market pullback; Exide stays in focus, recovers lost ground

By Stephanie N. Rotondo

Phoenix, June 12 - The tone of the distressed debt market remained negative on Wednesday, traders reported.

However, most of the day's activity was focused on high yield issues or equities, one trader pointed out.

Exide Technologies Inc. was again the center of attention in the distressed space, as the market continues to react to the company's bankruptcy filing from earlier in the week. But while the rest of the market was down, Exide paper managed to trade higher.

Meanwhile, it was mostly more of the same so-called go-go names that were trading. One trader saw Desarrolladora Homex SAB de CV's 9½% notes due 2019 drop nearly 2 points to close around 37 1/2.

The Mexican homebuilder said on Tuesday that it had skipped a coupon payment on the debt.

Verso Paper Corp.'s 8¾% notes due 2019 were also lower, falling 2½ points to 361/2.

Also weak were Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018, which a trader called "down a touch" to 801/2.

Exide recoups ground

Exide Technologies' 8 5/8% notes due 2018 were again the focus in the distressed space on Wednesday, following the company's bankruptcy filing on Monday.

But after two days of losses, the paper was moving up, with a trader seeing a "smart rebound" to 59.

He called that up 2½ points on the day.

Another trader said the issue hit highs around 59, leaving it 58½ bid, 59 offered.

Yet another trader said the debt was "better," hitting 59 late in the session.

The Milton, Ga.-based battery maker and recycler sought Chapter 11 protections on Monday, citing a shutdown of its recycling plants in California, as well as a declining balance sheet. The company's financials have been soft, especially since Wal-Mart opted to buy batteries from Johnson Controls Inc. instead of Exide in 2010.

Additionally, there is about $31 million of interest payments due in August and a floating-rate convertible note that comes due in September.

Exide was previously in bankruptcy in 2002.

Momentive notes dip

Momentive Performance Materials Inc. was softer during the midweek trading session, though without any fresh news.

A trader saw the 9% notes due 2021 closing at 89, down a point.

Another trader echoed that level.

Momentive is an Albany, N.Y.-based specialty chemical manufacturer.

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