Cenveo dips as rating on watch; Alpha Natural benefits as natural gas prices rise; PDVSA falls

By Stephanie N. Rotondo

Phoenix, Oct. 2 - Distressed bonds were coming off of Monday's highs, traders reported on Tuesday.

One trader noted that there was a "decent-sized seller in the market from some fund" that was unloading product into the marketplace.

Meanwhile, new issues continued to churn out at a rapid pace.

Cenveo Corp.'s debt dipped as the company's ratings were placed on watch, with negative implications.

Elsewhere, Alpha Natural Resources Corp. remained on the active side, though essentially unchanged on the day. Natural gas prices have been inching up of late, leaving some to wonder if a return to coal usage is in the offing.

In other energy names, Petroleos de Venezuela SA bonds were softening Tuesday, after climbing up in the previous session. The company's debt tends to trade a lot, but will likely see increased volatility heading into Venezuela's elections.

Cenevo slips on credit review

Cenveo, a Stamford, Conn.-based manager and distributor of print and related offerings, saw its debt dip Tuesday as Standard & Poor's said it had placed the company's ratings on CreditWatch, with negative implications.

One market source called the issue down half a point, trading around 85. Another also said the paper was half a point weaker, but at 86 bid.

S&P based its action on the belief that Cenveo will face liquidity challenges in the near term, especially ahead of a nearly $100 million maturity of its 7 7/8% notes coming due in mid-2013.

Alpha Natural goes up

Alpha Natural's "bellwether" 6% notes due 2019 was on the active side Tuesday, with at least $13 million of the bonds changing hands, a trader said.

But he called the paper unchanged at 84 1/2.

Another market source saw the 6¼% notes due 2021 rising a bit to 84 bid.

There was no fresh news out on the coal producer, but rising natural gas prices could be a positive for the sector as a whole. The typically cheaper natural gas has taken market share away from the coal arena of late, so a significant price increase could help boost demand for coal.

PDVSA loses grip

A trader said bonds of PDVSA remained liquid Tuesday, as an election in Venezuela nears.

About $70 million of the 9¾% notes due 2035 changed hands, he said, seeing the issue fall a point to 843/4. The 8½% notes due 2017 were down over 1½ points at 89 3/8, on about $40 million traded.

Another "$20-odd million" of the 9% notes due 2021 turned over, down over a point to 843/4.

A regime change in the country - currently headed by Hugo Chavez - could mean big changes for PDVSA, which is responsible for propping up many of the country's social programs. The opposition, however, wants to take the political aspect of the company out of the equation and also intends to attempt to rework supply contracts with allies such as China.

Last year, PDVSA exported about half of its crude oil out of the country. In many cases, the oil was paid for not in cash, but with goods or services. This, combined with the company's social program responsibilities, have been a drain on cash flow.

Kodak paper eases

Eastman Kodak Co.'s bonds weakened during the day's session, according to traders.

The company is currently in bankruptcy and has been selling of assets in order to exit Chapter 11 protections.

A trader said the 9¾% second-lien notes due 2018 fell to 62 bid, 63 offered.

Another market source saw the 7¼% notes due 2013 dropping a point to 11½ bid.

Because it is in bankruptcy, Kodak is required to file monthly operating reports. August's report showed that the company had burned through about $92 million in cash, up from the average burn of about $70 million per month.

The company had $345.8 million in cash and equivalents as of the end of August.

Kodak is based in Rochester, N.Y.

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