Navistar softens despite avoided proxy fight; PDVSA drops as Chavez reelected; Supervalu slips

By Stephanie N. Rotondo

Phoenix, Oct. 9 - The distressed debt market was weaker Tuesday, though a trader said there were "no major movers," up or down.

"Lots of things were pretty much unchanged," he said.

"A couple bids were getting hit late in the day," another trader said.

Still, another trader said that "volume was up a little bit," despite it being a Jewish holiday that left several desks empty.

Navistar International Inc.'s bonds were down - albeit in minimal trading - following news out late Monday regarding a battle with investor Carl Icahn. The company announced that it had agreed to add three members to its board in an effort to avoid a proxy fight with Icahn.

Meanwhile, Petroleos de Venezuela SA's debt was "dominating," a trader said. That was no surprise, given that the name is typically active. However, the action in the bonds - and the downward course - came after Hugo Chavez won Venezuela's election on Sunday in his tightest margin yet.

And, Supervalu Inc. paper was weakening toward the end of the day, according to a trader. The notes have been slipping of late, as the company has struggled to find a buyer.

Navistar sidesteps proxy fight

A trader said there was "minimal activity" in Navistar International's 8 ¼% notes due 2021, though the paper was deemed down a point at 951/2.

But another trader said the bonds "didn't look like they really moved at all," also pegging the notes with a 95 handle.

On Monday, the Lisle, Ill.-based manufacturer of utility vehicles said that it had succumbed to shareholder pressure and was replacing three members of its board. The new members will be shareholder Carl Icahn, Mark Rachesky and a third picked out by Icahn and Rachesky.

Icahn had been fighting for the board changes since earlier this year, as the company struggled to get its new engine technology approved by federal regulators.

The company ultimately scrapped the project and elected to use the standard technology that most of its rivals had employed. Navistar's chief executive, Dan Ustian, was also fired at that time, as he was blamed for the failures.

"Now that all this has happened as we envisioned, Navistar also is in the race for survival we anticipated as it attempts to rise from the ashes with what we believe is potentially insufficient liquidity to fund its most difficult transition over the next year," wrote Gimme Credit LLC analyst Vicki Bryan in a report published Monday.

Chavez win pressures PDVSA

Incumbent president Chavez won his reelection bid in Venezuela on Sunday, though by the tightest margin yet.

Despite a pro-Chavez banner being hung outside PDVSA's headquarters upon the win, the state-owned oil company's debt was dropping come Tuesday, as investors had hoped for a challenger win.

A trader saw about $50 million of the 9¾% notes due 2035 change hands, falling nearly 1½ points to 791/2. The 8½% notes due 2017 fell almost half a point to 87 5/8, on about $37 million traded.

The 9% notes due 2021 were off marginally at 83.

Investors had hoped that Henrique Capriles would oust Chavez, who has deeply politicized PDVSA. Chavez also uses profits from the oil producer to fund everything from social programs to sports teams, which has depleted the company of enough funds to invest in itself. That has resulted in production and construction delays.

On Monday, analysts at JPMorgan also noted that production was expected to decline in the coming year, even as the country sits on one of the world's largest oil deposits.

Supervalu in retreat

Supervalu debt continued to tumble Tuesday, according to market sources.

One trader said the 8% notes du 2016 "traded into an 86¼ bid, leaving them offered there." He added that there was a late-day trade at 86.

Another source placed the issue at 86¼ bid, down a point.

In addition to it being a generally weaker day, Supervalu's bonds have been coming off as the company struggles to find a buyer. Potential buyers such as KKR and Ron Burkle have expressed a desire for pieces of the company, but not the whole.

Broad market dips

Elsewhere in the distressed space, a trader saw Edison International Inc.'s bonds - which tend to trade in line with one another - fall to a 48-50 context, down from 51-52.

The trader also saw NewPage Corp.'s 10% notes due 2012 moving up to around 51/4, while the 11 3/8% first-lien notes due 2014 held in around 58.

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