Distressed trading subdued ahead of Fed meeting; Homex retreat goes on; Texas Competitive dips

By Stephanie N. Rotondo

Phoenix, July 29 - It was a lackluster start to the week for the distressed debt market on Monday.

A trader said that volume in the overall high-yield space hit only about $800 million. Most of the actively traded names were of the richer variety.

The muted trading session could have something to do with an upcoming meeting of the Federal Reserve. Investors are hoping that the central bank will give some sort of indication on when it plans to begin tapering its stimulus program.

However, one distressed name, Desalladorra Homex SAB de CV, was the day's "biggest trader," with about $20 million of the 9½% notes due 2019 changing hands.

The debt dropped 1¾ points to 283/4. The paper was also declining on Friday after the Mexican homebuilder reported incredibly weak earnings for the second quarter.

Among domestic names, Texas Competitive Electric Holdings Co.'s 15% notes due 2021 were seen off about 1½ points on the day by one trader.

He pegged the notes around 24.

Another market source quoted the issue at 24 bid, 24½ offered.

The company's parent organization, Energy Future Holdings, is currently trying to figure out how to restructure a mound of debt ahead of a November maturity. Previous plans to shed debt failed, including a plan to separate the unregulated unit from the rest of the company. Energy Future said in a regulatory filing in April that to do so would mean a $2 billion cash tax liability for the company, as well as a potential tax event for the parent.

But a new plan is reportedly in the works, as creditors have begun talks with Centerview Partners LLC and Akin Gump Strauss Hauer & Feld LLP.

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