PDVSA notes decline amid riots in Venezuela; Mexican homebuilders get pressured; TXU unit dips

By Stephanie N. Rotondo

Phoenix, April 16 - The overall market was firming on Tuesday, but notable distressed debt names were not reaping the benefits.

Emerging market distressed debt was the most active, specifically Petroleos de Venezuela SA and Mexican homebuilders such as Corporacion GEO SA de CV and Desarrolladora Homex SAB de CV.

For its part, PDVSA's bonds were struggling as continued strife relating to Sunday's election caused worries about the country's direction. Riots broke out Monday in Venezuela as many protested the narrow election of Nicolas Maduro, the vice president who served under Hugo Chavez.

The Mexican homebuilders meanwhile have been under pressure of late, as Mexico's president has indicated a preference for multi-family homes versus single-family units. Fitch Ratings downgraded GEO and Homex on Tuesday.

Among domestic names, Texas Competitive Electric Holdings Co. LLC - a unit of Energy Future Holdings Corp. - saw its debt drop 3 to 4 points on the day. On Monday, the company and its parent said that it had engaged with certain creditors regarding a restructuring proposal, but that the terms were not agreed up on and that talks had halted.

PDVSA debt falls

PDVSA bonds were under pressure Tuesday, as rioting in the wake of Sunday's election resulted in concerns of prolonged instability in the region.

A trader called the 8½% notes due 2017 down 2½ points at 941/4, while the 9¾% notes due 2035 dropped over 6 points to end around 89.

On Sunday, Nicolas Maduro - the vice president who served under Hugo Chavez - was narrowly elected as president following Chavez's death last month. Maduro took just over 50% of the vote.

Soon afterward, opposition candidate Henrique Capriles Radonski - who took just barely over 49% of the vote - was calling for a recount. Capriles' office has said that hundreds of thousands of votes were not counted and that it has evidence of voter fraud and intimidation.

The agency that oversees the vote has declined a recount.

As such, many Venezuelans took to the streets, rioting and protesting, leaving at least seven dead and many more injured.

Maduro is calling the protests Capriles' attempt at a coup and talk is that Capriles might be brought up on charges for inciting violence.

The South American country is an OPEC nation and is sitting on one of the world's largest oil reserves. Under Chavez, foreign investment in those reserves was strictly limited. State-owned PDVSA meantime saw its debt surge in the last few years, as Chavez has used funds from the company to pay for social programs. However, that policy in particular has resulted in missed production targets and a lack of capital to fund capital improvements to get production up to snuff.

Maduro has said he would continue to use PDVSA money to pay for the social programs in the depressed nation, but many speculate that he might be more willing to allow foreign investment into its oil fields.

GEO up, Homex declines

The Mexican homebuilding industry remained weak Tuesday amid negative headlines and rating downgrades.

However, Corporacion GEO debt managed to gain slightly, even as Fitch downgraded the company.

A trader saw the 9¼% notes due 2020 inch up just over half a point at 51 5/8. The 8 7/8% notes due 2022 were up a like amount at 51 7/8.

Meanwhile, Homex's 9¾% notes due 2020 dropped over 8 points to 53.

Fitch also downgraded Homex on Tuesday.

And, Urbi Desarrollos Urbanos SAB's bonds were all softer, falling 5 to 7 points on the day.

The 8½% notes due 2016 dropped to 32 bid, 32¼ offered from previous levels around 39, while both the 9½% notes due 2020 and the 9¾% notes due 2022 declined to 31 bid, 31½ offered from 36 on Monday.

Last week, it was reported that Urbi had hired Rothschild as a restructuring advisor. GEO followed that up with an announcement of an imminent restructuring.

On Monday, Homex said it was considering selling assets in order to raise cash. Come Tuesday, Urbi was in the news again as Barclays plc and Credit Suisse AG filed a lawsuit against the company related to margin calls.

TXU bonds drop

Texas Competitive Electric bonds took a hit as the company and its parent said restructuring negotiations failed to result in any agreements.

A trader said the 15% notes due 2021 dropped 4 points to end around 26. The "real junior stuff," such as the 10¼% notes due 2015, fell to 9, down from 12 previously.

In a regulatory filing on Monday, Energy Future and several subsidiaries - including Texas Competitive - said that it had proposed a restructuring of the companies' capital structure to certain creditors. However, the parties were not able to reach an agreement and, according to the filing, talks were halted.

The companies asserted that they would continue to explore options, either with its current proposal or via other avenues.

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