Distressed space focused on Caesars, Momentive, Walter; agency preferreds end weaker

By Stephanie N. Rotondo

Phoenix, March 17 - A trader blamed St. Patrick's Day for the light volume in the distressed debt market seen throughout Monday's session.

"It was a very slow day," he said, noting that total trading volume in all of the high-yield space was under $1 billion.

United Rentals Inc.'s recent new issue was dominating trading.

But in distressed dealings, it was more of the typical "go-to" names.

Caesars Entertainment Corp. debt was mixed, as the 9% notes due 2020 closed steady at 89, while both the 8½% notes due 2020 and the 10% notes due 2018 moved up half a point or more to 87¾ and 421/2, respectively.

Momentive Performance Materials Inc.'s 9% notes due 2021 meantime fell almost a point to 833/4.

In the coal space, Walter Energy Inc. was inching higher. The 8½% notes due 2021 put on a quarter-point to end around 681/2, and the 9 7/8% notes due 2020 gained nearly a point to close around 731/2.

And, OGX Petroleo E Gas Participacoes SA's 8½% notes due 2018 traded at 61/2, according to a trader.

He called the level unchanged.

Fannie, Freddie gyrate

As the new week began, preferred stock investors were continuing the previous week's trend - that is, zeroing in on Fannie Mae and Freddie Mac.

A trader noted that the agencies' preferreds were again higher, taking a cue from Friday.

The securities were up at least 1.5% to 2.5% in early trading. However, the preferreds were gyrating once again and started to fall in late-morning trades.

Freddie's 8.375% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) dropped a nickel to $11.15, and Fannie's 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) lost a dime to close at $10.65.

Fannie's 8.25% series T noncumulative preferreds (OTCBB: FNMAT) also started strongly only to come in by late morning. But that issue was holding steady most of the day and finished the session unchanged at $13.00.

A bipartisan group of senators has recently proposed legislation that would wind the two GSEs down over the course of the next five years. Once liquidated, a government bond insurance program would be implemented but would only kick in once private investors took sizable losses.

Though the proposal has some support in the Senate, it is not so loved in the House. In fact, Edwin Groshans, an analyst with Height Analytics, supposed in a research note on Monday that there was a less than 10% chance of the bill passing.

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