Distressed debt drops with market; Alpha Natural gives up gains; OGX still strong on sale buzz

By Stephanie N. Rotondo

Phoenix, July 24 - The distressed debt market drifted in with the market on Wednesday.

That trend was clearly seen in Alpha Natural Resources Inc. The coal sector in general has been on the upside as the market has run up, but once it began to weaken, so did coal names.

A trader called both the 6¼% notes due 2021 and the 6% notes due 2019 off 1¾ points, at 86½ and 881/4, respectively.

Another market source pegged the 6¼% notes at 87 bid, down 1½ points on the day.

The Bristol, Va.-based coal mining company is slated to release its second quarter earnings at the end of next week.

Meanwhile, OGX Petroleo & Gas Participacoes SA continued to gain ground. The Brazilian oil company's debt began to push higher on Tuesday, which one trader said was due to talk of potential asset sales.

A trader called the 8½% notes due 2018 up nearly 2½ points at 22 3/8. He noted that the issue was the "biggest trader" in all of the high-yield space.

The 8 3/8% notes due 2022 were also firming, closing up 3 points to 22.

Creditors are already rallying together to figure out what to do about the company majority-owned by Eike Batista. The 2018 paper has lost nearly 80% of its value since January as the OGX has failed to meet production targets.

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