Distressed debt quietly retreats on government shutdown concerns; OGX expected to miss coupon

By Stephanie N. Rotondo

Phoenix, Sept. 30 - The month-end trading session - a Monday no less - saw thin trading as investors waited to see if the government would avoid a partial shutdown by midnight.

For the distressed bond market, that meant weakness across the board, though a trader noted that new issues continued to overshadow lower-quality debt.

OGX Petroleo e Gas Participacoes SA was in the news, as The Wall Street Journal reported that the company was planning to skip a $44.5 million interest payment on Tuesday. The article also claimed that a bankruptcy filing was likely by the end of October.

Though the overall market had a softer tone, some names were gaining ground, albeit on no fresh news.

Verso Paper Corp.'s 8¾% notes due 2019 rose a point to end at 331/2, according to a trader. The trader also saw Energy Future Holdings Corp.'s Texas Competitive Electric Holdings Co.'s 15% notes due 2021 up half a point at 221/2.

OGX to miss coupon

OGX's 8½% notes due 2018 were trading off over 2 points, a trader said Monday.

He pegged the issue around 15.

Another trader called the bonds "a little lower," seeing them in a 15 to 16 context.

The dip came as The Journal reported that the Brazilian oil company majority-owned by Eike Batista was planning to skip a $44.5 million coupon payment on its 2022 paper.

The company also has a coupon on the 2018 maturity in December.

According to The Journal article, the company is working on a bankruptcy filing, which is expected to come by the end of the 30-day grace period.

Additionally, Brazlian newspaper Valor reported that OGX was thinking about selling its Tubarao Martelo oil field to Malaysia's Petroliam Nasional Bhd. after it files for Chapter 11 protections. In May, Petronas had agreed to pay $850 million for a 40% stake in the field, but negotiations faltered as Petronas said OGX needed to deal with its restructuring effort first.

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