Affinion jumps on debt-for-equity swap; Fannie, Freddie preferreds rise; Energy XXI sinks

By Stephanie N. Rotondo

Phoenix, Sept. 30 – Distressed bonds were on the rise with the broader markets, stemming two days of losses.

Affinion Group Holdings Inc. gained a good bit on Wednesday following news the company is swapping debt for equity. The exchange is aimed at reducing its cash interest payments by $50 million a year.

Among distressed preferred stock issues, Fannie Mae and Freddie Mac paper was also recuperating with the wider marketplace.

Fannie’s 8¼% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) rose a dime, or 2.11%, to $4.85, as Freddie’s 8 3/8% fixed-to-floating rate noncumulative perpetual preferreds (OTCBB: FMCKJ) gained 11 cents, or 2.3%, to $4.90.

There was no fresh news out on the mortgage giants, though there has been ongoing speculation about legislative action in regards to reforming the GSEs.

But while most of the market moved into higher territory, Energy XXI Ltd.’s bonds were weaker following the company’s earnings results, which came out late Tuesday.

In addition to releasing the numbers, the oil and gas producer said it has been repurchasing bonds in an effort to reduce its annual interest expense.

Affinion Group announced on Wednesday a debt-for-equity exchange and, as a result, its bonds got a hefty boost.

A market source placed the 7 7/8% notes due 2018 at 74 bid, 75 offered, up from trades with a 67 handle on Tuesday.

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