OGX bonds stay busy but finish mixed; coal sector names pull back after another downgrade

By Stephanie N. Rotondo

Phoenix, June 28 - Distressed bonds were on the firmer side Thursday, though volume was muted as investors sought new issue and health care names, given the Supreme Court's decision to uphold so-called Obamacare.

But some distressed - or near-distressed - issues were getting play. OGX Petroleo e Gas Participacoes SA, the Brazilian oil company owned by Eike Batista, ended mixed on the day, after falling as much as 8 points in the previous session. One issue, at least, had a bit of a rebound following Wednesday's news that the company had cut its production targets.

The coal industry was again topical during Thursday's session, as the sector received its third downgrade this week. But while positive comments from executives at Peabody Energy Corp. had helped spur a modest rally Wednesday, names in that arena snapped and began to trade down again.

OGX again active, but mixed

OGX bonds were "again active," a trader reported.

"They were the high volume guy yesterday," he noted.

He called the 8½% notes due 2018 up a point around 90, on about $43 million traded.

Another trader also said the paper was active, adding that "it was probably one of the more notable ones."

But he called the 2018 securities unchanged, also at the 90 level. However, he deemed the 8 3/8% notes due 2022 "definitely down a couple points" at 87 bid, 88 offered.

OGX said late Tuesday that it plans to maintain output of 5,000 barrels per day at its first two wells. The company had previously estimated that it could get 20,000 barrels per day.

However, the company also noted that it intended to increase production within the next 12 months.

Also in that realm, Petroleos de Venezuela SA, the Venezuelan state-owned oil company, remained busy.

A trader called the 9% notes due 2021 unchanged at 72, with about $23 million changing hands.

Coal sector snaps

Alpha Natural Resources Inc. joined a growing list of its sector peers in receiving a downgrade this week.

Moody's Investors Service cut its corporate family rating on the coal producer to B1 from Ba2 Thursday. The change followed a similar alteration by Moody's of Arch Coal Inc. on Wednesday, and another one from Standard & Poor's on James River Coal Co. on Tuesday.

All the downgrades were based on concerns about weakness in the coal industry, the decline of demand and financial constraints due to either procuring the coal or dealing with regulatory issues.

On Wednesday, however, the sector attempted to rebound, buoyed by comments made during a conference call for Peabody Energy, in which the top executive, Gregory Boyce, opined that foreign demand was set to climb.

But the latest downgrade Thursday took away the previous session's gains.

Alpha Natural's 6% notes due 2019 were off nearly a point, a trader said, ending at 851/4. Another trader also pegged the issue around "65-ish," which was "down slightly from yesterday."

Arch Coal's 7¼% notes due 2021 meantime lost 1½ points, ending at 83.

Distressed market firms

Elsewhere in the distressed realm, a trader said Nokia Corp. bonds continued to rebound.

He saw the 5 3/8% notes due 2019 at 79, up almost a point, while the 6 5/8% notes due 2039 were up nearly 1½ points at 78 1/8.

Another trader said AMR Corp.'s 6¼% notes due 2014 - the benchmark issue of the bankrupt airline - were trading up around 61.

The trader also saw Circus and Eldorado Joint Venture's 10 1/8% notes that were to have matured March 1 trade at 78.

"Haven't seen that one in awhile," he said.

© 2015 Prospect News.
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