Cemex bonds drop, market speculates about restructuring; Genworth postpones IPO, debt declines

By Stephanie N. Rotondo

Portland, Ore., April 18 - Distressed debt was slightly weaker Wednesday, though "barely," according to a trader.

"There still seems to be a lot of cash around," he said.

Still, most bonds were trading with a downward tilt.

Cemex SAB de CV was "getting crushed," a trader said, as bonds lost 2 to 3 points on the day.

Meanwhile, Genworth Financial Inc. paper dropped 5 to 6 points on the day on news the company had pulled plans for an initial public offering in Australia due to extensive losses.

In other topical names, Residential Capital LLC's notes gave up some of the gains incurred Tuesday after the market learned the company had missed a coupon on its 6½% notes due 2013. However, a trader said volume was quite light, despite being on the active side the day before.

"I don't know what to make of that," he said.

Cemex takes a hit

A trader said Cemex bonds were "getting crushed," falling 2 to 3 points in midweek trading.

He called the 9¼% notes due 2020 down 3 points at 86 and the 9% notes due 2018 down a deuce at 89.

The struggling Monterrey-based cement and aggregate producer has struggled amid a housing and construction downturn. Additionally, its heavy debt load - the company has $8 billion coming due in 2014 alone and another $572 million in 2013 - has made investors weary.

In a report put out by Reuters on Monday, Standard & Poor's analyst Luis Martinez was quoted as saying that "there is no way that the company can pay at maturity" in 2014. The rating agency already has a negative outlook on the company, given that overall market projections are not great.

As such, investors are speculating how Cemex might try to deal with its balance sheet. For his part, Martinez said he believes some sort of restructuring or renegotiating will have to take place in the near term. However, he also noted that he did not think Cemex would have troubles reaching some sort of accord.

In 2011, Cemex reported a full-year loss of $1.5 billion.

Genworth slides, IPO pulled

Genworth Financial's 6½% notes due 2034 got rocked Wednesday after the company pulled plans for an Australian IPO.

A trader said the issue was down almost 5 points at 86. Another trader said he heard paper was down 5 to 6 points on the day, though he did not have any specific markets.

A third source also called paper down 5 around the 86 level.

Genworth said Wednesday it was postponing the IPO of its Australian unit due to "elevated" losses in that country. The company said it now hopes to hold the IPO in early 2013.

"This new timeframe primarily reflects recent business performance in Australia," the company said in a statement. "For the 2012 first quarter, the company expects to report elevated loss experience in Australia as lenders accelerated the processing of later-stage delinquencies from prior years through to foreclosure and claim at a higher rate and severity than expected, particularly in coastal areas of Queensland that experienced natural catastrophes and regional economic slowdowns and among certain groups of small business owners and self-employed borrowers.

"First quarter experience is anticipated to result in a modest first quarter loss in the Australian MI business."

Genworth is a Richmond, Va.-based life insurance and mortgage insurer.

ResCap loses gains

Residential Capital's 9 5/8% notes due 2015 gave back the gains earned on Tuesday after it was learned the company had missed a coupon on its 6½% notes due 2013.

A trader called the paper down 4 points at 86, though he added that trading was very thin.

"I don't know what to make of that," he said of the lack of volume.

ResCap missed the $20 million interest payment on its 6½% notes due 2013 on Tuesday, giving rise to chatter that the company could soon be filing for bankruptcy. Though technically a default has not yet occurred, the skipped coupon could be yet another sign that parent company Ally Financial Inc. is lining ResCap up for Chapter 11.

Last week, Ally gave ResCap an extension on $2.1 billion in secured financing until May 14. The shorter-than-usual extension also indicated that perhaps a filing could come within the next few weeks.

However, if the payment goes unpaid, thus triggering a default, it will then have to be decided if ResCap is separate enough from its parent that Ally itself can avoid falling into bankruptcy.

On Wednesday, Moody's Investors Service downgraded ResCap to C from Ca, citing the missed payment.

As previously reported Ally has been struggling to figure out what to do with ResCap for some time. In recent months, talk of a bankruptcy has escalated, though other options - such as selling the unit whole or in pieces - has also gained traction. Fortress Investment Group has been touted as the most likely buyer and the deal has been valued at over $1 billion.

ResCap is based in Minneapolis. Ally is based in Detroit.

Mixed day for distressed

In the rest of the distressed space, a trader said Exide Technologies Inc.'s 8 5/8% notes due 2018 had dropped 1½ points to 791/2. Another trader pegged the issue at 79 bid, 80 offered.

The first trader also deemed Bon-Ton Stores Inc.'s 10¼% notes due 2014 "basically unchanged" at 84, though in active dealings.

Another trader saw Ambac Financial Group Inc.'s 9½% notes due 2021 trading up "a half point or so" to 171/4.

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