Colt Defense stays firm despite downgrade; Homex notes in demand; Endeavour climbing steadily

By Stephanie N. Rotondo

Phoenix, July 17 - Distressed bonds "keep grinding higher," a trader said Wednesday.

That was true even for Colt Defense LLC, despite getting downgraded by Moody's Investors Service and Standard & Poor's. The rating change was based on the company's recently completed merger with Colt's Manufacturing Co. LLC.

Even Desarrolladora Homex SAB de CV's 9½% notes due 2019 were moving up.

"I got the impression that people were looking for those since they have gotten to such distressed levels," a trader said, seeing the issue closing near 31.

That compared to 28 bid, 29 offered previously.

Among other recently topical emerging market names, OGX Petroleo & Gas Participacoes SA's 8½% notes due 2018 were holding in around the 16 mark, according to a trader.

Elsewhere in the oil space, Endeavour International Corp.'s 12% notes due 2018 were seen up almost 2 points at 86.

"Those have been swinging," a trader said.

The Houston-based oil producer held an operational update conference call on July 10, in which it said that its Rochelle field in the North Sea was ready to produce. On that news, the bonds moved up from the low-70s to around 80 and has been steadily climbing up ever since.

Colt up despite downgrade

A trader said Colt Defense's 8¾% notes due 2017 put on another point on Wednesday, after gaining nearly 5 points on Tuesday.

He placed the debt around 81.

Another trader also saw the notes trading around that level.

On Tuesday, the Hartford, Conn.-based manufacturer and seller of firearms said it had wrapped up a merger with New Colt Holding Corp., the parent company of Colt's Manufacturing.

The two entities had previously split up in 2002.

Come Wednesday, Moody's downgraded the 2017 notes to Caa2 from Caa1, citing the fact that the $60.5 million merger was financed in part by a $50 million non-rated term loan.

Standard & Poor's also cut Colt's rating, moving the notes to CCC- from CCC. S&P also gave a negative outlook, due to a moderately deteriorated liquidity profile.

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