Exide Technologies notes dominate again; Homex skips coupon, bonds dip; PDVSA debt ends softer

By Stephanie N. Rotondo

Phoenix, June 11 - The distressed debt market continued to focus on Exide Technologies Inc. on Tuesday, just one day after the company filed for bankruptcy.

One trader said the name was "at the top of the list again," as the bonds fell as much as 2½ points on the day.

In the emerging market space, Desarrolladora Homex SAB de CV saw its bonds dip slightly after the Mexican homebuilder said it had missed a coupon on its 2019 paper.

And, Petroleos de Venezuela SA was weaker. The Venezuelan-based state-owned oil company announced it had signed yet another financing agreement on Tuesday.

Overall, the market had another down day.

"There were a lot of heavy traders today," one trader said. "Virtually nothing" was on the upside.

Exide active, weaker

A trader said Exide Technologies was the "name du jour again" on Tuesday, following news of the company's bankruptcy filing on Monday.

The trader saw the 8 5/8% notes due 2016 trading around 56.

Another trader pegged the issue at 551/2, which he called down 2½ points on the day.

"It was mostly the Exide show today," remarked a third trader who called the debt "fairly active," though "down another point or so" at 56.

The bonds are trading flat, or without accrued interest.

The Milton, Ga.-based battery maker and recycler sought Chapter 11 protections on Monday, citing a shutdown of its recycling plants in California, as well as a declining balance sheet. The company's financials have been soft, especially since Wal-Mart opted to buy batteries from Johnson Controls Inc. instead of Exide in 2010.

Additionally, there is about $31 million in interest payments due in August and a floating-rate convertible note that comes due in September.

Exide was previously in bankruptcy in 2002.

The company is working with law firm Skadden, Arps, Slate, Meagher & Flom LLP and financial adviser Alvarez & Marsal North America LLC on its restructuring effort.

Homex misses coupon

Mexican homebuilder Homex missed a coupon on its 9½% notes due 2019, the company said Tuesday.

A trader said there were "only a couple trades" in Homex bonds, with the 9½% notes ending "virtually unchanged to maybe down a quarter [point]" at 391/4.

The 7½% notes due 2015 were off a point at 38.

Homex will enter the 30-day grace period on the indenture. If it fails to make the coupon payment within that 30 days, it will officially be in default.

Like its sector peers, Homex has been struggling of late, burdened by heavy debt loads and a government that is pushing for more city-based apartment-style housing instead of single-family homes in the suburbs.

PDVSA loses steam

PDVSA debt was weaker Tuesday, even as the company inked yet another financing deal.

A trader saw the 9% notes due 2021 decline over 2½ points to 83 3/8, while the 8 ½% notes due 2017 fell a point to 911/2.

The 5 3/8% notes due 2027 were down nearly 2½ points at 601/4.

On Tuesday, PDVSA inked a $2 billion long-term credit line with Chevron International, its Petroboscan joint venture partner. Funds from the facility will be used for capital improvements at the Boscan heavy oil field, with the end goal of upping production by 20,000 barrels per day.

The loan priced at Libor plus 450 basis points and matures June 30, 2025.

PDVSA has been on a financing kick of late, having recently secured $4 billion from China National Petroleum Corp. in an effort to increase production at the Petrolera Sinovensa joint venture, as well as a $1.5 billion deal with Russian Rosneft to form a joint venture called Corporacion Venezolana del Petroleo.

Additionally, Schlumberger provided a $1 billion revolving credit line for oil delivery services and to maintain and increase company activities and cash flow.

Fannie, Freddie helped by suit

A market source said that some of Fannie Mae and Freddie Mac's preferred securities were trading higher, following news out late Monday regarding a shareholder lawsuit.

Freddie's 8.375% fixed-to-floating noncumulative perpetual preferreds (OTCBB: FMCKJ) gained a quarter, or 4.67%, ending at $5.60. Fannie's 8.25% series S fixed-to-floating noncumulative preferreds (OTCBB: FNMAS) rose 31 cents, or 6.03%, to $5.45.

Shareholders of Fannie and Freddie filed a lawsuit against the U.S. government on Monday, alleging that the 2008 takeover of the mortgage giants was illegal and at the cost of the shareholders' property rights. The suit claims that the government bullied and coerced the firms' board of directors in order to ensure that the companies would continue to provide mortgage guarantees, but on the government's terms.

"The companies' willingness to continue providing liquidity to the mortgage markets on a large scale was crucial to the recovery of the devastated home market and the broader economy," the plaintiffs' lawyers said in court documents. "The government took control of the companies to make sure this happened on its terms, completely ignoring the loss of rights and economic value it caused to the shareholders."

Furthermore, the shareholders believe that the 2008 takeover that resulted in government conservatorship was unwarranted, as neither agencies' financial status met the 12 requirements for takeover as laid out by the Housing and Economic Recovery Act of 2008.

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