Distressed arena focuses on emerging markets; OGX remains pressured; Exide recoups lost ground

By Stephanie N. Rotondo

Phoenix, June 14 - There wasn't "a ton that was down" in the distressed debt market on Friday, according to a trader.

As for the day's volume leaders, there was "a lot of [emerging market] stuff," such as OGX Petroleo & Gas Participacoes, he said. Those bonds have come off over 15 points in the last week amid growing default concerns as the company's billionaire owner Eike Batista struggles to raise cash.

On the domestic side, Exide Technologies Inc. remained active. Traders called the company's debt a little firmer on the day, continuing the strength seen in Thursday's session.

Exide filed for bankruptcy on Monday.

OGX stays active, weak

OGX bonds were deemed "pretty active" during Friday trading and "basically unchanged."

A trader saw the 8½% notes due 2018 trading with a 42 handle.

But another trader said the issue was down half a point, also in that 42 context.

Fitch Ratings dropped OGX's rating to CCC from B- on Friday, with a negative outlook. The agency said its actions were based on the belief that the Brazilian oil and gas company was running out of cash and that it could face insolvency by year-end.

Moody's Investors Service and Standard & Poor's had cut the company's ratings in April.

The concerns about the company's status have grown since last month, when billionaire owner Batista cut his stake in OGX. But Batista's overall cash troubles - his own fortune has diminished considerably in the last year - have caused concerns for investors, given the sale and worries that he might not be able to afford a $1 billion put option that expires next year.

Exide extends gains

Exide Technologies was firm again on Friday, extending gains from Thursday's session.

One trader saw the 8 5/8% notes due 2018 rising a point to close around 62. Another trader also placed the debt around that level, deeming it "a little bit better."

A third trader said the bonds were up a deuce at 62.

The Milton, Ga.-based battery maker and recycler filed for Chapter 11 protections on Monday.

Fannie, Freddie soften

In the world of preferreds, Fannie Mae and Freddie Mac securities were among the few losers in the market.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) fell 18 cents, or 3.4%, to $5.12. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) meantime dropped 14 cents, or 2.66%, to $5.13, while the 8.25% series T noncumulative preferreds (OTCBB: FNMAT) declined 32 cents, or 4.26%, to $7.20.

Fannie and Freddie have gyrated a lot of late as investors ponder whether or not there will be any recovery in the event the government - which currently controls the two mortgage giants - decides to liquidate. One group of shareholders has banded together, filing a lawsuit against the government in which they allege the 2008 takeover of the companies was illegal and a violation of property rights.

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