Distressed debt remains negative; Patriot Coal bonds climbing higher; GEO, Homex extend gains

By Stephanie N. Rotondo

Phoenix, June 3 - The distressed debt market was "heavier in general," a trader said Monday.

The space has been weak since the previous week, after the Treasuries selloff. The trader also noted that volume for Monday's session wasn't much, attributing it to being the first day of the month.

"We're definitely in risk-off mode right now," he said.

Bucking the day's trend, Patriot Coal Corp. bonds were moving upward, even as union members and supporters sought to protest a recent ruling allowing the bankrupt coal producer to cancel union and retiree benefits.

Mexican homebuilders were also rising, continuing a trend seen toward the end of last week. On Thursday, Mexico's housing authority said it would postpone releasing new housing subsidy rules in order to engage in talks with industry leaders, most of which are struggling under heavy debt loads.

Patriot Coal gains

Patriot Coal's 8¼% notes due 2018 saw "a little bit of trading," a trader said Monday, as the paper moved up to "right around 45."

Another market source pegged the debt at 44¾ bid, up nearly 2 points.

Last Wednesday, the court overseeing the St. Louis-based coal company's bankruptcy case ruled that Patriot could cancel certain union contracts that would allow it to save $150 million per year.

The ruling will allow the company to cease pension contributions and move retiree healthcare benefits to an outside fund.

But union workers are looking to fight the ruling. As such, a major protest is planned for Tuesday in Western Kentucky.

GEO, Homex rise

Corporacion de GEO SAB de CV and Desallodorra Homex SAB de CV continued to gain ground Monday, following a postponement of new housing subsidy rules in Mexico last week.

GEO's 8 7/8% notes due 2022 popped nearly 3 points, a trader said, closing around 43. Homex's 9¾% notes due 2020 inched up half a point to 391/2.

On Thursday, Mexico's housing authority said it would delay the release of the new rules in order to allow industry leaders to put in their 2 cents.

The homebuilding sector in Mexico has been struggling of late, as the country's government has moved to support more apartment building versus single-family homes.

Most homebuilding projects in the country are government-subsidized.

National Bank plans tender

National Bank of Greece SA's $2.25 series A noncumulative preference shares (NYSE: NBGPA) have been more active of late and Monday's session was no different as investors reacted to news of a tender offer.

The tender was announced on Friday.

The shares were down 3 cents at $12.41.

The Greek bank said Friday that it would call 22.5 million of the 25 million outstanding $25-par shares for $12.50 per share.

The offer expires June 28.

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