Distressed bonds stronger, but investors keep eyes on new issues, stocks; PDVSA closes higher

By Stephanie N. Rotondo

Phoenix, Sept. 9 - A raging stock market and a busy new high-yield issue calendar was keeping attention away from the distressed debt market on Monday.

"The stock market went berserk and that's what everybody was watching," one trader said.

Another trader pointed to another round of new deals getting priced, adding that there were "a bunch of deals being chattered about in the market."

But despite a lack of notable activity in the distressed arena, it was still a firm trading day overall.

J.C. Penney Co. Inc. paper "continued to move up," a trader said, seeing the 7.4% notes due 2037 moving up to 74. Another trader also called the issue better, deeming it up a point at 741/4.

Alcatel Lucent SA was also on the rise. The 6.45% notes due 2029 were seen at one desk at 82, while a source at another desk placed the bonds at 81¾ bid, up almost a point.

Even the coal space was picking up some ground. Alpha Natural Resources Inc.'s 6% notes due 2019 were pegged at 86 by one trader, while another saw the notes at 84¼ bid.

Arch Coal Inc.'s 8¾% notes due 2016 were also stronger, gaining about half a point to end at 981/2, according to a trader. However, the 7% notes due 2019 came off almost a point, closing at 791/2.

And James River Coal Co.'s 7 7/8% notes due 2019 put on a point, a trader said, as the paper closed around 34.

In other non-coal related names, a trader said Exide Technologies Inc.'s 8 5/8% notes due 2018 were firmer, trading around 711/2. He also saw Nortel Networks Inc.'s 10¾% notes due 2016 moving up to 116.

PDVSA bonds firm

Petroleos de Venezuela SA's debt was ticking higher, even as it was reported that Malaysian-based Petronas was pulling out of a joint venture project with the Venezuelan-based state-owned oil producer.

A trader said the name was "by far the most active" of the entire high-yield space.

The trader said the 8½% notes due 2017 gained a point, closing at 91, while the 5 3/8% notes due 2027 moved up 1½ points to 581/2. Both the 5¼% notes due 2017 and 9% notes due 2021 put on over a point, with both ending the day at 81 1/8.

According to one report, Petronas has already exited the Petrocarabobo project located in the Orinoco Belt. Petronas chose to leave the JV due to disagreements with PDVSA over how money was being spent and delays on the project.

PDVSA owns 60% of the project, while a consortium that use to include Petronas owns the remaining 40%. Petronas reportedly held 11% of that stake, which will likely be divided up between the remaining group members.

Venezuelan law dictates that the government must approve how those shares are dispersed.

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