Distressed debt volume subdued amid strong market; Edison busy, holds in; Axtel recoups losses

By Stephanie N. Rotondo

Phoenix, Jan. 3 - The overall high-yield market was "pretty robust" in terms of volume, a trader said Thursday. In terms of price, it was "more up than down."

But the distressed debt space of the high-yield universe continued to sputter along.

"There's a fair amount of money around," another trader said. However, he also noted a "lack of sellers."

Edison Mission Energy continued to be on the active side, as investors worry about certain tax provisions included in the fiscal cliff deal that could hurt the already bankrupt company.

Meanwhile, Axtel SAB de CV moved higher after falling in the previous session. The Mexican-based telephone services provider is in the midst of a distressed debt exchange.

Edison bonds hold

Edison Mission Energy's bonds were "very active again," but were holding in the 50 area, to which they fell to in the previous session.

"There's some issues with the tax-loss carrybacks," he said, noting new provisions set forth by the fiscal cliff deal.

The Santa Ana, Calif.-based unit of Edison International Inc. filed for bankruptcy in mid-December after failing to make a coupon payment in November. As part of its reorganization plan, the parent company will sell off its stake, leaving it a standalone company.

Axtel bonds recover

Axtel paper regained some of the ground lost on Wednesday, according to a trader.

He called the 7 5/8% notes due 2017 - which, along with the 9% notes due 2019, are the target of a distressed debt exchange - up 1½ points to 541/2.

Under the terms of the swap, Axtel will exchange $765 million of the 9% and the 7 5/8% notes. Holders that tender their bonds will receive 4356.5 million of new 7% notes due 2020, $26.3 million of 7% convertible notes due 2020 and a cash payment of $114.8 million upon early tenders.

Though Fitch downgraded Axtel because of the exchange - a typical move - the agency said it could revise the ratings after the swap is completed. The deal is expected to boost Axtel's leverage.

More gains for distressed debt

Elsewhere in the distressed arena, Momentive Specialty Performance Inc.'s 9% notes due 2021 were up over a point at 741/4, a trader reported.

The trader also saw NII Capital Corp.'s debt rising a about a point, the 8 7/8% notes due 2019 at 83 and the 7 5/8% notes due 2021 at 79 3/8.

Another trader said there was a fair bit of activity in ATP Oil & Gas Corp.'s 11 7/8% notes due 2015, seeing the bonds trade in a range of 11 to 111/2.

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