Odebrecht remains weak as company fights off rumor mill; Avaya’s upward trend continues; AMD gains

By Stephanie N. Rotondo

Seattle, July 22 – Distressed debt traders once again remarked that the day’s activity was focused on more high-yield issues than on distressed credits.

Notably, Revlon Inc.’s $450 million of 6¼% senior notes due 2024 was “all the volume,” a trader said. The deal came Thursday.

Also trading busily were Olin Corp. bonds. One trader said that the name was down 1 to 2 points on the day following a “big revision in guidance.

“The stock was getting beat up pretty good,” the trader added. “It was down like 20%.”

Despite the focus on “all the go-to regular high yield” names, as one trader put it, there were a few distressed names that were trying to grab investors’ attention.

Odebrecht Finance Ltd. and Avaya Inc., for instance, continued to be of note, following Thursday’s trend.

Odebrecht, for its part, was continuing to soften amid concerns about the company and its association with a corruption scandal in Brazil. The parent company, Odebrecht SA, was also looking to fight back against rumors it was seeking some sort of reorganization.

As for Avaya, that paper continued to climb upward, though there hasn’t been any news to explain either the surge in trading volume or the gains.

Another name that was topical for the day was Advanced Micro Devices. The Sunnyvale, Calif.-based chip maker reported earnings late Thursday, showing a swing to profit and the first sales increase in almost two years.

In response, a trader said the bonds “rallied a good bit.”

Meanwhile, the energy space was on the quieter side, though Whiting Petroleum Corp. was more active than not, according to market sources.

One trader said the 5¾% notes due 2021 declined almost 2 points to 89¼. Another trader pegged the paper at “89 and change.

“That’s down, definitely, call it a point,” he said.

The weakness came as domestic crude oil retreated. The market is also gearing up to hear the company’s second-quarter results on Wednesday.

Elsewhere, a trader said DFC Finance Corp.’s 10½% notes due 2020 dropped “another three-quarters of a point” to 48¼.

That issue is currently the subject of an exchange offer, which is set to expire on Tuesday. The notes will be swapped for new 12% senior secured PIK toggle notes due 2020.

Odebrecht losing ground

Odebrecht Finance’s 7 1/8% notes due 2042 remained under pressure on Friday, as rumors continued to swirl about the overall financial strength of the parent organization.

A trader said the notes dipped almost a point to 33¾. That was in addition to the 2 points lost on Thursday.

At another desk, a trader said the bonds were “down a little bit,” placing them in a 33½ to 34 context.

On Thursday, financial blog Brasil Journal wrote that Odebrecht – which has been struggling under its debt burden due to allegations of corruption in Brazil – was looking to reorganize. The company issued a statement refuting the claims.

“With regard to the rumor published in the blog Brasil Journal, Odebrecht informs that the speculations regarding an alleged court-supervised reorganization are completely false,” the company said in its statement. “The group is not considering such an alternative. Its dialogues with banks continue to be very positive, with proof of this including the recent financial restructuring at Odebrecht Agroindustrial, which involved the injection of new funds, and the transaction to raise capital at Odebrecht Transport. The asset divestment program is already bearing fruit, with some transactions already completed and others in the final phase of negotiation.”

In April, it was reported that Odebrecht’s attempts to refinance as much as 35 billion reals in loans was not going well, as banks were weary of the corruption scandal. In the last week, it was reported that a sale for the company’s 55% stake in a natural gas pipeline in Peru was not going well, as banks were refusing to finance the project if Odebrecht stayed involved.

Avaya churns higher

Avaya’s bonds continued to trade higher during Friday’s session.

“I haven’t heard why,” a trader said of the recent gains. “I haven’t seen any specific news.”

He said the 10½% notes due 2021 were “up a good bit,” trading into the high-20s from the low-20s. He also saw the 7% first-lien notes due 2019 rising to 77 bid, 77 ½ offered from 75 bid, 76 offered previously.

A second trader deemed the 10½% notes up 5½ points at 29.

Avaya is a Santa Clara, Calif.-based business communications company.

Advanced Micro beats

Advanced Micro Devices’ debt was gaining ground on Friday after the company reported earnings late Thursday.

One trader saw the 7¾% notes due 2020 moving up to 98½ from levels around 96 previously. Another market source pegged the 7½% notes due 2022 at 96¼ bid, up over 4 points on the day.

For the quarter, AMD swung to a profit, mostly due to one-time items. Including those items, profit was $69 million, or 8 cents per share. That compared to a loss of $181 million, or 23 cents per share, the year before.

On an adjusted basis, EPS came to 5 cents.

Revenues increased 9% to $1.03 billion.

Analysts polled by Thomson Reuters had forecast a loss of 8 cents per share on revenue of $951.3 million.

The company also noted that it posted an operating profit – and ahead of its own expectations.

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