Distressed market makes comeback; PDVSA, OGX regain ground; Fannie, Freddie preferreds soften

By Stephanie N. Rotondo

Phoenix, June 25 - The distressed debt market bounced back Tuesday, as consumer confidence numbers came in better than expected and central banks in the United States and China said they would do what they could to calm volatile markets.

Of recent topical losers, Petroleos de Venezuela SA's debt rallied as much as 4 points on the day, according to a trader. He pegged the 8½% notes due 2017 at 881/4, up a deuce, while the 5¼% notes due 2017 earned 3 points, closing at 781/2.

The 9¾% notes due 2035 were "up nearly 4 points" at 75 1/8.

In other emerging market names, OGX Petroleo e Gas Participacoes SA's 8½% notes due 2018 put on almost 2½ points, closing at 30 3/8.

Another trader called the issue up 1 to 2 points, "trading just north of 30."

Back among domestic names, NII Holdings Inc.'s 7 5/8% notes due 2021 inched up a point to 76, on no news.

A second trader said the debt closed up half a point at 751/2.

Also firmer were Caesars Entertainment Corp.'s bonds. One trader saw the 8½% notes due 2020 gaining 1¼ points to close around 92¾ and another market source placed the 10% notes due 2018 at 57 bid, up 1¾ points.

A third source called the 10% notes "about a point better" at 561/2.

And, Affinion Group Inc.'s 7 7/8% notes due 2018 increased 2¾ points to close at 741/2.

In the world of preferred stocks, Fannie Mae and Freddie Mac suffered slight declines on Tuesday following the introduction of the so-called Corker Bill into the Senate. The bipartisan bill would set out a plan to liquidate the two mortgage giants within five years, replacing it with a new government entity.

However, the plan would provide little recovery for preferred holders, according to a market source.

Fannie, Freddie falter

Fannie Mae and Freddie Mac preferreds ended the session softer following the introduction of the Corker Bill into the Senate.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) lost a nickel, closing at $5.10. Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) dropped a penny to $4.94.

Though the preferred shares were not all that weaker, a market source noted that "some of these issues have lost about 30% since April."

The Corker Bill would effectively bring about the end of Fannie and Freddie within five years. In its place would be the Federal Mortgage Insurance Corp., which would function similarly to the Federal Deposit Insurance Corp.

Under the bill, "all net worth would transfer to the Treasury," a source said, making Fannie and Freddie "completely debt-financed companies" by their end. The source opined that the way the bill would liquidate the two agencies would "bode very, very poorly for preferreds," as there would be little to nothing left for them to recover.

© 2015 Prospect News.
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