Distressed bonds finish week flat; OGX bankruptcy rumors fly, debt falls back to single digits

By Stephanie N. Rotondo

Phoenix, Oct. 25 - It was a flat kind of day for the distressed debt market on Friday and overall trading was "very limited," a trader said.

There was, however, increasing chatter of a bankruptcy filing from OGX Petroleo e Gas Participacoes SA. Brazilian publication Valor Economico reported that talks with creditors had ended earlier in the week, with no restructuring agreement reached. But with a 30-day grace period rapidly coming to an end, the struggling company majority-owned by Eike Batista may have run out of options.

Meanwhile, Energy Future Holdings Corp.'s 10% notes due 2020 were trading off 1½ points on the day, according to a trader. That company is also believed to be working on a bankruptcy filing, given a hefty Nov. 1 interest payment that the power producer would rather not pay at this time. Negotiations with creditors and senior lenders have been ongoing, but there has yet to be any sort of deal.

A second trader placed the issue at 104, which he said was "a little lower."

Among other companies thought to be circling the drain, J.C. Penney Co. Inc.'s 7.65% notes due 2016 were pegged at 761/4, down half a point.

And, NII Holdings Inc.'s 10% notes due 2016 lost over half a point to end at 88.

Of companies already in bankruptcy but working hard to get out, AMR Corp.'s 6.25% convertible notes due 2014 held this week's trading gains, changing hands in the range of 119 to 120 on Friday, according to Trace data, despite a drop in the underlying shares.

"AMR held in there despite the stock getting smoked," a New York-based trader said. He cited rumors about a meeting with the Department of Justice, "but with a closed door meeting who knows what happened."

And, Nortel Networks Corp.'s 10¾% notes due 2016 were "down about a point," according to a trader, seeing the paper at 1143/4.

OGX in single-digits again

OGX's 8½% notes due 2018 and 8 3/8% notes due 2022 fell back into the single-digits on Friday on talk a bankruptcy filing could come within a few days.

A trader said the debt was trading around 9.

Another trader said the issue was trading "just below 10," which he called "a touch lower."

After missing a coupon on the 2022 paper earlier this month, the oil producer started talks with creditors to figure out a restructuring plan. However, Valor Economico reported that talks ended on Tuesday without any agreement reached.

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