Distressed bonds steady; Fannie, Freddie weaken as former regulator calls paper worthless

By Stephanie N. Rotondo

Phoenix, April 4 - Distressed debt traders reported that there was very little in the way of price movement for distressed bonds on Friday.

"There was not too much notable in distressed names," one trader said.

Most issues were holding steady, such as Claire's Stores Inc.'s 8 7/8% notes due 2019.

One trader pegged the issue around 861/2, "on pretty good volume." Another trader echoed that level.

The bonds had started to drift down after the company reported dismal earnings and the speedy exit of its chief executive officer on Tuesday.

NII Holdings Inc.'s 10% notes due 2016 were also unchanged around 41, according to a trader. However, the 7 5/8% notes due 2021 slipped a touch to 301/2.

That was also the trend in Energy Future Holdings Corp. debt as the company gets closer to either filing bankruptcy - considered the most likely scenario - or comes up with some other restructuring plan.

The 10% notes due 2020 held around 106, but the 15% notes due 2021 dipped nearly a point to 24.

A trader also said that Momentive Performance Materials Inc.'s 11½% notes due 2016 were holding around 32. But another trader said the issue was off half a point - also at 32 - while the 9% notes due 2021 fell a point to 80.

Momentive, like Energy Future, is said to be contemplating a bankruptcy filing. The company said in a regulatory filing earlier in the week that it was negotiating a deal with stakeholders.

On Thursday, it was reported that a group of secured bondholders had hired law firm Dechert LLP to represent them in a restructuring effort. Back in February, Momentive said it had hired Lazard Ltd. to advise on its options.

Fannie, Freddie lose

Fannie Mae and Freddie Mac preferreds were again becoming topical as the agencies' former regulator, James Lockhart, opined that the securities were "worthless" in an interview with Reuters.

That didn't bode well for the preferred shares, as Freddie's (OTCBB: FMCKJ) dropped 45 cents, or 4.17%, to $10.35 and Fannie's (OTCBB: FNMAS) lost 40 cents to close at $9.90.

The Fannie issue had previously been trading north of $10 per share.

But a trader noted that another news graphic was circulating that showed how much the GSEs had paid back to the government post-bailout - and how based on that amount, the firms could have paid off at least 80% of the principal amount of their outstanding preferreds.

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