Distressed action muted as many head out for holiday; AMR firms as anti-trust court date set

By Stephanie N. Rotondo

Phoenix, Aug. 30 - Distressed bond trading was muted Friday as it was not only the last day of the month, but was also the last day before the three-day Labor Day weekend.

"It's definitely a sleepy day," a trader said, adding that it was "nothing unexpected for a shortened Friday before a holiday."

"Most people are already gone," another trader said just shortly after 2:30 pm ET. He said some market players had hung around to hear a speech from Secretary of State John Kerry regarding Syria, but that once the speech was over, "it was done."

Kerry said that U.S. intelligence showed it was clear "and compelling" that the Assad regime had used chemical weapons on citizens, leading to more speculation on how the world - specifically the United States - will handle the debacle.

And while stocks gyrated around the speech, the bond market was not much fazed.

AMR Corp.'s convertible bonds continued to creep higher as a federal judge scheduled a November trial date for the Justice Department's anti-trust suit against the company and its merger partner, US Airways.

Justice had previously asked for a March trial date.

Meanwhile, OGX Petroleo & Gas Participacoes SA bonds were hanging in, even as one Brazilian brokerage called the company's stock worthless. On Thursday, The Wall Street Journal reported that a restructuring plan was expected to be unveiled from the company within the next couple of weeks.

AMR gaining altitude

AMR's benchmark 6¼% convertible notes due 2014 were "up a touch," a trader said, pegging the issue in a par ½ to 101 context.

That compared to par-par ¼ on Thursday.

Another trader also placed the issue around par 1/2, which he said was up about half a point.

Both traders noted that trading in the name was thin.

The second trader said the slight gain was due to a federal judge setting a November trial date for the company's anti-trust lawsuit. The Justice Department filed the suit against AMR and US Airways in mid-August, just as bankrupt AMR was slated to have its plan of reorganization approved.

The plan is centered on the merger with US Airways. For its part, Justice was said to be seeking a March date for the trial, but Judge Colleen Kollar-Kotelly scheduled it for Nov. 25.

"March 3, I think, is too far off. It needs to be a tighter, expedited schedule," the judge said in court.

Earlier in the week, Justice and the two companies indicated in court filings that they would be willing to settle the suit, which would allow the merger to go through.

OGX holds in

OGX's 8½% notes due 2018 were "where they've been," according to a trader on Friday.

He quoted the issue at 18½ bid, 19 offered.

The struggling Brazilian oil producer owned by Eike Batista is expected to release a reorganization plan in the coming weeks. The plan is believed to include a debt-for-equity swap, as well as plans to raise fresh capital.

It is unclear, however, if creditors will go for it.

The uncertainty might have increased on Friday, as Sao Paulo-based Gradual Investimentos told Bloomberg that the stock is worthless and is being inflated by its presence on Brazil's benchmark index.

Earlier this month, it was reported that bondholders had hired Rothschild to advise them on a potential restructuring. OGX meantime hired Blackstone Group LP to act as an advisor.

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