Holidays, Spring Break take focus over market; Overseas Shipholding stays firm; Cengage steady

By Stephanie N. Rotondo

March 25 - The distressed debt market was muted Monday, as many desks were empty due to Passover and Spring Break.

That trend was expected to continue over the course of the week, especially given that Friday is a holiday for Easter.

And, of those that remained in their seats, it was "all new issues" for them, a trader said.

Still, traders did continue to see gains in Overseas Shipholding Group Inc.'s debt. The bonds have been on a tear of late, though there has been no fresh news out on the bankrupt ocean shipping company.

And, Cengage Learning Acquisitions Co. Inc.'s debt was holding steady, even after the company's late Friday news that it had drawn down its revolver and hired restructuring advisors.

Overseas Shipholding riding wave

A trader said that Overseas Shipholding's 8 1/8% notes due 2018 were the "hot bond" during Monday trading.

He saw the issue rising as high as 79.

He noted that the stock was up too, but that he had not seen any news to act as catalyst.

"But obviously, it's on the move," he said.

Another trader pegged the notes at 78 bid, 79 offered.

"They crept up a little more," he said.

The stock (OTCBB: OSGIQ) closed up 35 cents, or 9.59%, to $4.00.

Cengage holds its ground

Cengage Learning's 11½% notes due 2020 were "still" trading around 74, a trader said Monday.

He also saw the 12% notes due 2019 trading in the low-20s.

The company's extended term loan was meantime seen holding in to rising just slightly to 72¾ bid, 73¾ offered.

On Friday, Cengage announced it had drawn down its revolving credit facility and that it had hired restructuring advisors.

The company borrowed $430 million under its revolver, which basically puts the loan at fully drawn, in order to ensure that it has sufficient liquidity to fund working capital needs, a news release said.

And, the company retained Alvarez & Marsal as restructuring advisor, Lazard as financial advisor and Kirkland & Ellis LLP as legal advisor.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Fannie, Freddie firm again

Fannie Mae and Freddie Mac preferreds continued to dominate trading in the secondary space, as investors pondered what will happen if larger profits at the government-backed mortgage providers trigger an accounting change.

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were up a dime, or 3.17%, at $3.25, while Freddie's 8.375% fixed-to-flloating rate noncumulative preferreds (OTCBB: FMCKJ) were up 17 cents, or 5.5%, to $3.26.

Earlier this month, Fannie said it was delaying filing its 10-K as it attempted to figure out if profits were such that an accounting change would need to be triggered. Under the change, nearly $62 billion of deferred tax assets would be restored to most or all of their value.

In doing so, Fannie's net worth would increase, most of which would go toward repaying the U.S. Treasury.

Suntech gets late-day boost

A trader said there was "some reasonable size lots" trading in Suntech Power Holdings Co. Ltd.'s 3% convertible notes due 2013.

Shortly after midday, the trader saw the issue falling from Friday levels to trade with a 27-handle.

"It's slowly drifting lower," he said. "I think people just don't know what is going to happen there and lower is the path of least resistance."

However, by the end of business, another trader said the issue had ticked up as high as 281/2.

The stock (NYSE: STP) meantime closed at 45 cents, up 2.75 cents, or 6.51%.

The Chinese solar company filed for bankruptcy on Wednesday. Eight of the company's Chinese lenders were behind the filing, as they had sought court approval the previous Monday to deem the main operating subsidiary insolvent.

Suntech had also failed to make a coupon payment on the convertible notes on March 15. The missed payment was deemed a default and therefore triggered defaults on other outstanding debt.

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