Energy Future makes coupon payment, bonds firm; OGX skips interest payment, debt rises anyway

By Stephanie N. Rotondo

Phoenix, Oct. 1 - A partial government shutdown resulted in thin trading in the distressed debt market, a trader said.

Investors were "nibbling a little bit," he said, though he added that there was "no real direction" to the market.

"There was very little volatility," he remarked.

Energy Future Holdings Corp.'s Texas Competitive Electric Holdings Co. saw its 15% notes due 2021 inching higher as the company made a coupon payment on Tuesday. The debt had been creeping up on hopes the struggling subsidiary - which is said to be nearing bankruptcy - would in fact make the payment.

OGX Petroleo e Gas Participacoes SA, however, failed to make a payment on its 2022 maturity on Tuesday. The non-payment was expected however, and the 2018 paper actually ended slightly firmer.

Among other distressed names, RadioShack Corp. debt was seen softening as Fitch Ratings maintained its "CCC" issuer-default rating on the company.

TXU pays coupon

Energy Future's 15% notes due 2021 linked to Texas Competitive Electric inched up a point to 231/2, a trader reported Tuesday.

The gain came as the flailing power producer said it had made an about $59 million coupon on the debt.

The bonds have been climbing upward for the last several sessions on expectations the interest payment would be paid, despite reports that company is working on a prepackaged bankruptcy plan. The subsidiary holds about $43.6 billion in debt and wants to file for Chapter 11 protections ahead of a $270 million coupon due Nov. 1.

OGX skips interest payment

OGX's 8½% notes due 2018 firmed during the session, even though the company missed a $44.5 million coupon on its 2022 maturity.

A trader saw the bonds quoted at 16½ bid, 17 offered, while another trader placed the issue around the 16 mark.

The first trader noted that there were sellers of the bonds in the marketplace.

The non-payment was largely expected by the market. The company said it wanted to preserve its cash to use for the development of its Tubarao Martelo oil field, its only producing field.

As is typical, the Brazilian oil company has 30 days to make the payment or find itself in default. As was previously reported, it is widely believed that the company - which is working with Blackstone Group LP and Lazard to look at its restructuring options - will file for bankruptcy before the 30-day deadline expires.

On the news, Standard & Poor's lowered OGX's rating to "D" from "CCC-."

OGX's skipped payment comes on the heels of Mexican homebuilder Desarrolladora Homex, SAB de CV missed payments on its 7½% notes due 2015 and 9¾% notes due 2020.

The payment on the 7½% notes came due on Monday and on the 9¾% notes on Wednesday.

Despite the missed payments, a trader said he saw no quotes for Homex paper during Tuesday trading. On Monday, he said, the 9¾% notes were quoted in a 24 to 26 context, while the 7½% notes were around 23½ to 251/2.

RadioShack drifts lower

A trader said RadioShack's 6¾% notes due 2019 traded off "2 and change points" to 71 3/8 on Tuesday.

Another trader also deemed the debt lower, quoting the paper at 70½ bid, 71 offered.

During the session, Fitch released a statement in which the ratings agency said it had affirmed its rating on the struggling electronics retailer at "CCC."

"The ratings reflect the significant decline in RadioShack's profitability and cash flow, which has become progressively more pronounced over the past six quarters," the agency said in the statement.

"Weak results have been due in particular to pressure on the company's mobility segment, and have led to a marked deterioration in the company's credit profile. There is a lack of stability in the business and no apparent catalyst to stabilize or improve operations."

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