Arch Coal bonds trade mixed after asset sale news; OGX rebounds this week; Clear Channel dips

By Stephanie N. Rotondo

Phoenix, June 28 - The distressed debt market was holding up as the week came to a close, but a trader noted that liquidity was lackluster across the broad high-yield space.

"There's not even 10 double-digit trades today," he said.

Arch Coal Inc. announced an asset sale on Friday, which helped some of its issues trade higher. Still, overall the debt was mixed at best.

Meanwhile, OGX Petroleo e Gas Participacoes SA was slightly better to unchanged, depending upon whom you asked. The bonds hit a low around 26 this week as investors worry there will be very little recovery left if the company goes under.

The Brazilian oil company missed a coupon payment on June 1.

Arch Coal mixed on news

Arch Coal was trading in mixed fashion on Friday, following news of an asset sale.

A trader saw the 7¼% notes due 2021 slipping almost a point to 81, but the 8¾% notes due 2016 moved up to par 1/8.

Another market source pegged the 2021 paper at 81 bid, 81½ offered, down from 81½ bid, 82 offered. The 8¾% notes, however, were up around par, versus previous levels around 99.

The St. Louis-based coal producer announced Friday that it had agreed to sell three of its Utah-based mines to Bowie Resources LLC for $435 million.

Arch expects to see a $120 million pretax gain from the transaction.

The sale is part of the company's effort to cut costs and divest non-core units as it deals with a slump in demand for coal. Arch has posted losses for the last two quarters.

OGX rallies during week

As Eike Battista's OGX burns through cash, investors pushed down the company's debt this week to a low of around 26.

However, by the end of the week, the bonds had rallied some.

A trader on Friday saw the 8 3/8% notes due 2022 inch up a touch to 293/4.

But another market source deemed the debt unchanged, the 8 3/8% notes at 29¼ bid, 29¾ offered and the 8½% notes due 2018 in a 32 to 33 context.

OGX missed a coupon payment on the 2018 paper on June 1.

In addition to the hefty cash burn, investors might also be concerned that civil unrest in Brazil could put a damper on things, as current conditions make it unlikely that the government would step in to help should the company go over the rails.

In other emerging market names, Petroleos de Venezuela SA's 8½% notes due 2017 slipped almost half a point to 911/4, as the 9% notes due 2021 dropped almost 2 points to 873/4.

Clear Channel, Exide soften

Among other distressed names, a trader said Clear Channel Communications Inc.'s 10¾% notes due 2016 were trading active, but lower, closing off nearly 2 points at 863/4.

Exide Technologies Inc.'s 8 5/8% notes due 2018 meantime fell almost a point to end around 61.

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