Distressed debt rises on light volume; PDVSA, Caesars head up; Fannie, Freddie preferreds dive

By Stephanie N. Rotondo

Phoenix, June 26 - Distressed debt remained firm in Wednesday trading.

"There wasn't much on the low-down, everything was recuperating today," a trader said.

Still, liquidity among distressed names was subdued as investors were either focusing on stocks or high-yield bonds, as there was little to no fresh news to drive anything one way or another.

Petroleos de Venezuela SA's 8½% notes due 2017 continued to be the top dog, however. A trader saw the highly active bonds rising a deuce to close around 90.

Meanwhile, Caesars Entertainment Corp.'s 10% notes due 2015 and 2018 were both up over 2 points, according to a trader. The debt ended the day at 85¼ and 581/2, respectively.

Another trader saw Clear Channel Communications Inc.'s 9% notes due 2019 moving up a point, closing around 96, while Alcatel-Lucent's 6.45% notes due 2029 also firmed a point.

"The company was in the market today with a new convertible deal, they are buying back some old converts," the trader said.

Even the recently stressed coal sector was picking up steam.

Arch Coal Inc.'s 8¾% notes due 2016 inched up half a point to 99 and Alpha Natural Resources Inc.'s 6¼% notes due 2021 put on a point, ending in a 79½ to 80 context, a trader reported.

Among distressed preferreds, Fannie Mae and Freddie Mac remained topical and media outlets and investors alike digested the newly introduced Corker Bill, which would liquidate the two mortgage giants within five years.

The agencies' preferreds closed the session dramatically lower.

Dramatic fall for Fannie, Freddie

Fannie Mae and Freddie Mac remained topical Wednesday, as media coverage on the newly introduced Corker Bill continued.

"It was heavy [trading] in Fannie and Freddie after yesterday's news," a source said, referring to the introduction into the Senate of a bill that would liquidate the two agencies within five years. "They've fallen pretty dramatically."

Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS), for instance, was off 62 cents, or 12.55%, at $4.32. From its $6.55 high on May 29, the paper has fallen "34% in less than a month," the source noted. The last time the issue traded at the current level was April 5.

"That would have been a good thing to short," the source said.

As for Freddie, the 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) declined 60 cents, or 11.76%, to $4.50.

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