Emerging market names take focus in distressed trading; NII Holdings' bonds still busy, softer

By Stephanie N. Rotondo

Phoenix, Nov. 14 - In the world of distressed debt on Thursday, emerging market names were taking a fair bit of focus.

Petroleos de Venezuela SA's always busy bonds were active as usual and mostly higher on the day, just one day after the Venezuelan oil producer announced a $4.5 billion offering of new debt.

A trader said at least $65 million of the 8½% notes due 2017 changed hands, rising half a point to 813/4. The 9% notes due 2021 were also firmer, gaining "almost 3 points" to end at 93.

But the 9¾% notes due 2035 fell nearly a point to 69.

OGX Petroleo & Gas' 8 3/8% notes due 2022 were meantime up half a point at 91/2. On Tuesday, it was reported that the company and its majority stakeholder, Eike Batista, planned to take a put option dispute to an independent panel. Batista has been fighting the put, which requires him to buy the company's stock at 6.3 reais - well over where the stock currently trades.

However, the stock was delisted from the BM&F Bovespa exchange on Wednesday.

Also on Wednesday, SMU SA - a Chilean operator of grocery stores - had its outlook cut to negative by Standard & Poor's. Come Thursday trading, however, a trader said the 7¾% notes due 2020 were up almost a point at 571/2.

The company's credit rating was affirmed at CCC+.

Among Mexican homebuilders, Corporacion GEO's 8 7/8% notes due 2022 ticked up half a point to 17.

And, a trader pegged China Forestry Holdings Co. Ltd.'s 7¾% notes due 2015 at 38.

NII stays busy, weak

NII Holdings Inc. was again active on Thursday, though one trader saw the bonds attempting to end their recent declines.

The trader said the 10% notes due 2016 - of which he said "$40-plus million" traded - ended the day up 1½ points at 611/2.

However, another trader called the issue lower, pegging it at 61. He said the paper had a high tick of around 86 and that the notes traded "in a pretty wide range," finishing the day at the lower end.

"They were down a few points," he said, calling the debt "very active."

The first trader called both the 7 5/8% notes due 2021 and the 8 7/8% notes due 2019 weaker at 48 and 52, respectively.

The second trader placed the 7 5/8% notes at the 48 mark as well.

NII Holdings is a Reston, Va.-based provider of Nextel Mobile phone service in Latin America.

Fannie, Freddie volatile

Freddie Mac and Fannie Mae preferreds continued to be active following a news report out Wednesday that indicated a group of private investors were looking to take the agencies private.

The trader noted that the group is aiming to take only a portion of the company, leaving most of the potential risks with the federal government.

Another market source said there was "no discernable trend" in the preferreds after Bruce Berkowitz's hedge fund Fairholme Capital Management LLC revealed its proposal to take over the agencies' mortgage-backed securities insurance businesses.

The source said that the plan was "kind of a good deal," but only for preferred holders. "Which makes it very unlikely to happen."

Under the proposal, Fairholme and its group of cohorts want 100 cents on the dollar for their preferred holdings, which currently trade at less than 50 cents on the dollar. Preferred holders and other investors would then backstop a $17.3 billion rights offering.

But the source noted that in order to take over the insurance potions of Fannie and Freddie, "the business would have to have a clean slate," which would leave the government holding about $20 billion in losses tied to those units.

"The Treasury has to keep all the initial risk," he said - something he highly doubted it would be willing to do.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) were up 64 cents in early trading at $9.45, but finished the day up only 9 cents, or 1.02%, at $8.90. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were 41 cents better at $9.26 early on, but closed the day down 17 cents, or 1.92%, at $8.68.

Fannie's 8.25% series T noncumulative preferreds (OTCBB: FNMAT) were meantime up 54 cents, or 5.83%, at $9.80.

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