NewPage second-liens remain strong; Hovnanian bonds faltering; National Bank of Greece tumbles

By Stephanie N. Rotondo

Portland, Ore., July 25 - Ongoing concerns about the U.S. debt ceiling and whether Congress could hash out a deal didn't help the distressed debt market Monday.

Still, some expressed hope, though hesitantly.

"I think everybody still kind of thinks something will get resolved," a trader said. In the interim, however, jittery investors make for a weaker market and thin volume.

"There was not even $1 billion in [total secondary] volume," another trader said.

NewPage Corp.'s second-lien debt continued to gain steam, though it was unclear what was driving the recent gains. The company is currently working to refinance or repay the debt before the end of the year in an effort to avoid the acceleration of other debt.

Meanwhile, a trader said K. Hovnanian Enterprises Inc. bonds were "trading a lot."

Like NewPage, there was no fresh news out to act as a catalyst.

In the world of distressed preferreds, National Bank of Greece SA's preferred stock tumbled more than 8% during Monday trading. The losses came as Moody's Investors Service downgraded Greece's sovereign debt rating again.

NewPage subs gain momentum

NewPage's 10% notes due 2012 were "a little bit better," according to a trader.

He pegged the issue around 27, up 2 points from Friday levels. He also saw the 11 3/8% notes due 2014 around 92.

"That was up a little bit," he said of the first-liens. "But not as much [as the 10% notes]. They're up probably almost a point."

Another trader also placed the 10% notes around the 27 level, which he said was up 2 to 3 points from Friday.

Earlier this month, the Miamisburg, Ohio-based papermaker paid a $100.7 million coupon on its first-lien notes. While it avoided a potential default, the company is not yet out of the woods, as it still has to repay or refinance the second liens before the end of the year to avoid the acceleration of other outstanding debt.

Hovnanian debt falters

A trader said Red Bank, N.J.-based homebuilder Hovnanian fell in active trading during Monday's session.

He called the 10 5/8% notes due 2016 nearly a point weaker at 951/2.

"They've been kind of falling down," he said, noting that the bonds were around par toward the beginning of the month.

Another market source also saw the issue at 951/2, deeming that down a deuce.

There was no fresh news out to cause the declines.

Greek bank losing ground

National Bank of Greece's 9% series A preferreds (NYSE: NBGPA) fell 72 cents, or 8.18%, to $8.08.

Volume, however, was thin at nearly 91,000 shares.

"On a percentage basis, it was down a lot," a market source said.

The decline came as Moody's Investors Service cut the country's sovereign debt rating three notches to Caa1 from Ca. The agency said the downgrade was due to the belief that, even with a new bailout plan approved by the European Union and International Monetary Fund, the country would likely still default.

Moody's also warned that the deal set a bad precedent for other struggling European countries.

Part of the deal with Greece calls for a distressed debt exchange, which is typically viewed as a default.

"Despite statements to the contrary, the support package sets a precedent for future restructurings should the finances of another euro area sovereign become as problematic as those of Greece," the agency said.

Still, Moody's has also praised Greece's bailout package, claiming that it will likely stem the "Euro-contagion" and help the country stabilize.

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