Natural gas prices rise, giving energy sector bonds boost; Mexican homebuilders under pressure

By Stephanie N. Rotondo

Phoenix, May 20 - A distressed debt trader said the market was muted Monday, as stocks and new bond issues remained in focus.

The energy space was moving higher, following a gain in natural gas prices. A trader saw Edison Mission Energy and Ameren Energy Generating Co. benefitting as a result.

In the emerging markets arena, Mexican homebuilders were on the decline. Urbi Desarrollos Urbanos SA de CV said its 30-day grace period on its 2016 paper had expired and that it had no plan to make the interest payment at this time. That did not help the company's sector peers.

Overall, distressed bonds continued to see strength. A trader called Momentive Performance Materials Inc.'s 9% notes due 2021 up 1½ points at 961/4, while the 10% notes due 2020 rose over a point to 110.

The trader also saw J.C. Penney Co. Inc.'s 5.65% notes due 2020 putting on nearly a point, ending around 891/4.

Another trader said AMR Corp. bonds were firming as the airline nears its bankruptcy exit. The trader pegged the 6¼% convertible notes due 2014 at 122 and the 9% notes due 2012 at 121.

Natural gas lifts energy space

A rise in natural gas prices - and an expected uptick in demand for power in the near term - gave some energy names a boost on Monday.

A trader saw Edison Mission's debt - which tends to trade on top of one another - up at 60 bid, 60½ offered.

The trader also called Ameren Energy paper better, the 7% notes due 2017 at 87, the 6.3% notes due 2020 at 80 and the 7.95% notes due 2032 at 791/4.

Another trader called Energy Future Holdings Corp.'s 10% notes due 2020 up almost a point at 113 3/8.

Natural gas for June delivery increased 3.5 cents, or 0.9% on Monday, closing at $4.09 per each million of British thermal units. The gains were attributed to upcoming weather forecasts that were predicting hot and humid temperatures in the Midwest and on the East Coast.

Mexican builders decline

It was more bad news for the Mexican homebuilding sector on Monday, as Urbi said it had officially defaulted on its 8½% notes due 2016, missing a $6.4 million coupon payment.

However, a trader saw little to no action in that particular name.

Still, Empresas ICA SAB de CV's 8.9% notes due 2021 dropped at least 7 points to 891/2, the trader said, as Desarrolladora Homex SAB de CV's 7½% notes due 2015 lost a deuce, closing around 47.

Homex's 9¾% notes due 2020 were also off about 2 points at 42 1/8.

For its part, Empresas ICA received a rating downgrade from Moody's Investors Service on Friday. The agency cut the rating to B2 from B1.

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