Distressed market 'somewhat stabilized' as equities hold in; PDVSA regains ground; OGX tumbles

By Stephanie N. Rotondo

Phoenix, June 21 - The distressed debt market "rebounded a little bit early, but I think we gave a lot of that back," a trader reported Friday.

"It was so quiet it was hard to tell," he noted.

Another trader said there was "not a tremendous amount of rebound," though he conceded that distressed issues had "somewhat stabilized," given that the equity markets did not take another dive during the session.

"Volumes are low; people are really in price-discovery mode," he said. Many investors are "apprehensive," he said, "given the moves the Treasuries have gone through."

As for the day's dealings, most of the activity in the distressed realm centered on the emerging market space.

Petroleos de Venezuela SA, which has been under pressure of late, managed to recoup some ground during the final trading day of the week. A trader pegged the 8½% notes due 2017 at 87¾ and the 5¼% notes due 2017 at 781/2.

That was up 1¾ and 2¼ points, respectively.

Desarrolladora Homex SAB de CV's 9¾% notes due 2020, however, dropped over 1½ points to 38 7/8.

Also in the emerging market arena, OGX Petroleo & Gas Participacoes SA bonds slipped after news that three independent board members had left the company owned by billionaire Eike Batista. The exits came as the company's stock has plummeted due to cash concerns.

Among domestic credits, Caesars Entertainment Corp.'s 10% notes due 2018 regained a point, closing at 563/4, according to a trader.

Another trader said Clear Channel Communications Inc.'s 11% notes due 2016 were "maybe a half-point better or so," seeing the paper in an 88 to 88½ context.

OGX sees board exits

OGX's debt was weaker Friday, following news that the company's board of directors was now three people lighter.

A trader said the 8½% notes due 2018 fell a deuce to 30. Another trader also pegged the paper around 30, seeing "a fair amount trading."

"It's been gyrating in the low-30s," he said.

Rio de Janeiro-based OGX did not give a reason for the departures of Pedro Malan, Rodolpho Tourinho Neto and Ellen Gracie Northfleetare. But the company's stock has been plummeting of late, after losing 91% of its value last year.

The declines have been based on concerns about cash and the level of commitment Batista has toward the oil and gas producer.

AMR facility frees

AMR Corp.'s credit facility freed up in the afternoon, with the $1.05 billion six-year debtor-in-possession term loan that converts into an exit term loan quoted at par bid, par ½ offered, according to a market source.

Earlier, the loan was reduced from $1.5 billion and pricing was lifted to Libor plus 375 bps from talk of Libor plus 325 bps to 350 bps. The debt has a 1% Libor floor and 101 soft call protection for six months, and it was issued at a discount of 991/2.

The company's $2.05 billion credit facility also includes a $1 billion revolver.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Barclays, Goldman Sachs Bank USA, J.P. Morgan Securities LLC and Morgan Stanley Senior Funding Inc. are leading the deal that will be used to help fund the company's plan of reorganization.

As a result of the term loan downsizing, the company is putting less cash on the balance sheet.

AMR is a Fort Worth, Texas-based airline company.

Sara Rosenberg contributed to this article

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