OGX bonds dive on canceled orders, possible well closures; Arch Coal dips, Alpha Natural rises

By Stephanie N. Rotondo

Phoenix, July 1 - The distressed debt market was firm Monday, even as volumes were subdued given the upcoming Fourth of July holiday.

One trader said most things were up about half a point, though there were "not many double-digit" traders during the session.

But while the broad market was strong, OGX Petroleo & Gas Participacoes SA's debt was off about 10 points or more on the day. The massive dip came as the company canceled new orders at its OSX Brasil SA sister company and said that it was considering halting production at some wells.

The coal arena meantime "tried to put up a fight," a trader said. Still, the sector closed the day mixed.

OGX bonds plummet

OGX bonds dominated trading during Monday's session, as a trader said about $100 million of the 8½% notes due 2018 and the 8 3/8% notes due 2022 traded combined.

The trader called the 2018 paper down over 12 points at 21, while the 2022 maturity ended at 19, off over 10 points.

The Brazilian oil company owned by Eike Batista said in a regulatory filing on Monday that it was canceling orders made for new drilling platforms from its sister company OSX Brasil. The company also said that it was considering halting production at some of its wells.

OGX will pay OSX $449 million for the canceled orders. That is equal to about 39% of the amount of cash the company had at the end of the first quarter.

On June 1, the strapped-for-cash oil maker missed a coupon payment on the 2018 paper. There's been no word on how the company intends to deal with that issue.

In other emerging market names, Petroleos de Venezuela SA's 8½% notes due 2017 rose 1½ points, closing at 92 5/8, according to a trader.

Coal closes mixed

Coal names finished the day in mixed fashion on Monday.

A trader said Arch Coal Inc.'s 7¼% notes due 2021 dropped over 3 points to close around 801/2. The paper had gained ground on toward the end of last week on news of an asset sale.

That left the trader to opine that the day's losses were due to profit taking.

Meanwhile, Alpha Natural Resources Inc.'s 9¾% notes due 2018 inched up fractionally to 97 1/8.

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