Distressed debt market closes week with softer tone; Puerto Rico's municipal bonds take a beating

By Stephanie N. Rotondo

Phoenix, April 11 - As the week came to a close, distressed bonds were once again following the equity markets lower.

"In general, the market was weaker, kind of ticking down with what the stocks were doing," a trader said.

There was also little in the way of news to spur activity in specific names. However, the trader speculated that once first-quarter earnings begin to come out, "that could shake the market up."

Caesars Entertainment Corp. remained a liquid name during the session. One trader saw the 9% notes due 2020 holding steady at 85, though the 10% notes due 2018 dropped 1½ points to 453/4.

The trader also saw the 8½% notes due 2020 falling almost 2½ points to 83 1/8.

However, both the 5¾% notes due 2017 and the 10¾% notes due 2016 were up over a point on the day, at 82 and 88, respectively.

Another trader placed the 10% notes around 46, which he said was down "over a point."

NII Holdings Inc.'s issue of 10% notes due 2016 was one of the day's big losers, losing about 2½ points to end around 36 3/8, according to a trader.

But a second trader said the name was "kind of quiet after getting beat up recently."

In the coal space, Alpha Natural Resources Inc.'s 6% notes due 2019 slipped a quarter-point to 80, and Arch Coal Inc.'s 7¼% notes due 2020 declined over a point to finish around 76 3/8.

Puerto Rico munis decline

Puerto Rico's $3.5 billion of 2014A general obligation bonds "have been getting beat up," a trader said.

On Friday, he saw the issue hitting a low of 86, though it came back to end around 88. Still, that compared to an 89½ to 90 context previously.

The issue priced March 11 and immediately began to slide. The U.S. territory has been struggling due to eight years of recession and a $70 billion public debt load.

Earlier in the week, it was reported that the island's fiscal agent had hired FTI Consulting Inc. to work on a restructuring of utilities and highways. It is believed that the utility unit has enough revenues to keep up with its $8.6 billion of debt, but there would be little - or nothing - left over for necessary improvements in the near future.

In an effort to spur the economy, the Puerto Rican government is considering literally hundreds of ideas, from cutting recognized holidays - the island currently has 20 holidays, double that of the United States - to more extreme measures like legalizing marijuana and prostitution.

Many have expressed outrage over the proposal to cut holidays, but government officials have noted that the days off cost $500 million in lost productivity and services.

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