Distressed bonds mixed as Fed official says taper may begin soon; OGX fires CFO, debt declines

By Stephanie N. Rotondo

Phoenix, Sept. 20 - The distressed debt market was mixed Friday, amid empty desks and unnerving comments made by Federal Reserve officials.

"Everybody has pretty much bailed," one trader said. Some market players were absent due to the Jewish holiday Sukkot.

The market was also attempting to digest comments made by James Bullard, president of the Federal Reserve of St. Louis. Bullard said that the central bank could decide to start its stimulus program taper as early as October, after deciding on Wednesday to delay edging the program out.

Still, the new issue flow was hot and heavy as the week drew to a close, which led investors away from mainstream distressed names.

OGX Petroleo & Gas Participacoes SA saw its bonds slipping as it was reported that the company had fired its chief financial officer. The dismissal comes hot on the heels of an attempt to stay afloat by seeking more cash from creditors.

Among domestic distressed credits, a trader said Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 continued to firm up, seeing the paper trade as high as 94. He also said that Edison Mission Energy paper remained strong, pegging the debt at 66½ bid, 67 offered.

And, Rotech Healthcare Inc.'s 10¾% notes due 2015 were seen trading with a 105 handle.

"I haven't seen that one in awhile," a trader said, noting that the company is nearing the end of its stay in bankruptcy.

OGX slips on CFO exit

OGX's 8½% notes due 2018 were coming in intraday after news came out stating the company's chief financial officer had been dismissed.

A trader said the debt started the day at 20½ bid, but fell to 19¾ post-news.

Roberto Monteiro was fired from his position, according to a regulatory filing made on Friday. The Brazilian oil company's board of directors approved the dismissal, but did not give a reason for the decision.

Monteiro had previously worked at sister company OSX Brazil SA.

OGX is currently seeking more cash from creditors as the company struggles to stay afloat. Adding to its troubles was word Thursday that Diamond Offshore Drilling Inc. was considering ending its contract with OGX, given that the company is behind on payments.

As of June 30, OGX owed Diamond Drilling $22.7 million.

In other emerging markets names, Petroleos de Venezuela SA saw its 8½% notes due 2017 drop almost a point to end at 96 5/8, while the 9 ¾% notes due 2035 slipped just a touch to 90.

The 5¼% notes due 2017 declined by nearly 1½ points to 84 1/8.

Chile's SMU SA meantime saw its 7¾% notes due 2020 rising 1½ points, closing around 651/4.

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