Energy remains focus as PDVSA, Alpha Natural post modest gains; AMR debt active; NewPage firm

By Stephanie N. Rotondo

Portland, Ore., May 25 - Distressed bonds maintained the "status quo," a trader said Friday, calling the market generally unchanged.

"It was a light day, pretty lackluster," he said, adding that "everybody is pretty much gone" ahead of the long weekend.

"Spanish banks just got cut to junk, but it's not really doing anything to the market," he remarked.

There continued to be a focus on anything energy related, such as Alpha Natural Resources Inc. and Petroleos de Venezuela SA. Both credits were posting modest gains in the final trading session of the week.

AMR Corp. was meantime "fairly active," one trader said, as "scuttlebutt" about a potential merger with U.S. Airways grew. News out indicated that certain hedge funds had joined a group of bondholders looking into the possible consolidation.

PDVSA, Alpha firming

The energy arena continued to garner attention from investors on Friday, with most names in that sector posting modest gains.

A trader said PDVSA's 9% notes due 2021 earned a deuce on the day, ending around 703/4.

In the coal space, he said names "caught a bid." That gave Alpha Natural Resources' debt a half-point boost.

He pegged the 6¼% notes due 2021 at 89¾ and the 6% notes due 2019 at 90.

Another market source called Alpha's 6¼% notes up half a point as well, seeing them at 89¾ bid.

And, Patriot Coal Corp.'s 8¼% notes due 2018 rose over a point to close at 50 bid.

AMR debt active

A trader saw AMR's 6¼% notes due 2014 trading "fairly active" around 50.

But another trader said he "didn't see hide nor hair" of the debt trading on Friday, while another saw the 9% notes due 2016 trading around 47.

Hedge funds are reportedly jumping on the merger bandwagon with a bondholder group that has been pressing a consolidation with U.S. Airways. According to the industry news outlet Airwise, York Capital Management, King Street Capital Marathon Capital, Claren Road Asset Management, Pentwater Capital Management and Litespeed Management have begun deciphering a merger proposal, though they have yet to throw their full support behind the idea.

Bondholders have been pushing for a merger, believing they can get a better recovery from the Fort Worth, Texas-based parent of American Airlines if it were to combine with Tempe, Ariz.-based U.S. Airways.

Appaloosa Management is also said to be considering the idea, though it has not yet officially joined the other groups.

AMR's management had previously resisted the idea of a merger, even after it filed for Chapter 11 protections. However, the company recently said it would work with the unsecured creditors committee in order to develop a potential merger plan, without fully committing to it.

NewPage inches higher

NewPage Corp.'s 11 7/8% first-lien notes due 2014 were "quoted a little stronger," according to a trader.

He placed the issue at "641/2-ish."

There has been no fresh news out on the Miamisburg, Ohio-based papermaker. But last week, Verso Paper Corp. reported poor earnings that pressured the sector as a whole.

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