OGX's cash plummets, bonds get beaten down; AMR plan not confirmed; J.C. Penney paper rallies

By Stephanie N. Rotondo

Phoenix, Aug. 15 - The distressed debt market had a "softer tone," a trader said Thursday.

The weakness came on the back of a 225-point decline in the Dow Jones industrial average.

"Volume was OK," the trader said. "It was all bid-wanted lists this morning. If you didn't catch anything off the lists, you didn't trade anything."

OGX Petroleo & Gas Participacoes SA bonds picked up in activity after the Brazilian oil company majority-owned by Eike Batista reported dismal earnings for the second quarter. The debt was down as much as 5 points on the day.

AMR Corp. was also continuing to weaken, though not nearly as much as it did earlier in the week on news of an anti-trust lawsuit form the Justice Department. The bankrupt airline was slated to have its reorganization approved on Thursday, but the lawsuit threw a wrench in those plans.

While most of the market headed down, J.C. Penney Co. Inc. saw a bit of a rally on news that investor George Soros had upped his stake in the struggling retailer.

Soros is now the second-largest shareholder, behind departing board member Bill Ackman.

OGX gets hit post-numbers

OGX paper was taking a hit on the back of the company's earnings release late Wednesday.

A trader saw the 8½% notes due 2018 dropping 2½ points to 15, as the 8 3/8% notes due 2022 lost over 5 points, closing at 14.

For the second quarter, OGX posted a net loss of 4.7 billion reais. That compared to $390 million reais the year before.

Additionally, the company's cash reserves declined 72% to $326 million - just barely more than the $316 million needed to fund the company's capital expenditure program.

OGX also said it had hired Blackstone Group LP to review its capital structure.

AMR future still in question

AMR's benchmark 6¼% convertible notes due 2014 slipped another point or two on Thursday, ending the day at 93 bid, 94 offered, a trader said.

The bonds have been under pressure all week, after the Justice Department said it had filed an anti-trust lawsuit against the company and its planned merger partner, US Airways.

On Thursday, the bankrupt Fort Worth-based airline was scheduled to have a hearing to approve its plan of reorganization, which was based around the merger. The judge, Sean Lane, instead asked the parties to address how he should move forward, considering the 11th-hour lawsuit.

But both AMR and US Airways have said they will fight the anti-trust suit and US Air's attorney called the last-minute filing "audacity" on the government's part.

"Everything is up in the air," a trader said. He also expressed frustration that the government would wait until the last minute to make any sort of fuss over the combination, especially considering how much money had been spent by both parties to get the deal done.

"We doubt Justice will prove its case if and when it comes to trial, but that indeterminate delay and the new uncertainty of the outcome has wrecked expectations for employees, service partners, flyers, as well as investors for both AMR and US Airways," Gimme Credit LLC analyst Vicki Bryan wrote in a report published early Thursday.

"We also don't expect AMR's creditors and employees will easily support the current plan of reorganization which took a year and a merger bid to complete if AMR could emerge as a standalone - another strong reason for the merger to close."

J.C. Penney bonds improve

J.C. Penney bonds rallied during Thursday trading as investors George Soros reported that he had upped his stake in the company.

A trader said the 6 3/8% notes due 2036 gained 2½ points to close at 683/4. The 7.4% notes due 2031 rose over 1½ points to 68½ and the 5.65% notes due 2020 gained 1½ points to 741/2.

The 6 7/8% notes due 2015 improved almost a point to 903/4.

Another market source deemed the 2020 maturity up almost 4 points at 74¼ bid.

In regulatory filings published late Wednesday, Soros of Soros Fund Management said he had increased his equity stake to nearly 20 million shares, making him the second-largest shareholder behind Ackman.

Despite leaving the company's board earlier this week, Ackman has said he has no plans to reduce his position.

While Soros was upping his stake, Hotchkis & Wiley and Tiger Global Management said they had liquidated their holdings in the Plano, Texas-based retailer.

Glenview Capital meantime cut its stake to 8.4 million shares from 9.5 million and Fidelity Management & Research sold half of its holdings.

Fidelity now owns about 4.6 million shares.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.