Momentive Performance bonds dive, bounce; Walter Energy, Global Geophysical rebound from lows

By Paul Deckelman

New York, March 21- Traders said the distressed-debt markets were quiet on Friday - with the notable exception of Momentive Performance Materials Inc.'s bonds, which fell sharply early in the session, before bouncing off their lows to partially recover that lost ground.

Traders cited a renewal of investor speculation that the underperforming Albany, N.Y.-based maker of specialty performance materials for high tech industries might be preparing for a debt restructuring or even a possible bankruptcy filing.

Trading was heavy in those Momentive issues, which dominated the day's junk market Most Actives list.

They also saw a little bounceback in Walter Energy Inc.'s bonds - including its newly priced PIK second-lien notes - which had fallen on Thursday in line with a slide in the Birmingham, Ala.-based metallurgical coal producer's shares, both triggered by a negative Bank of America report about the overall coal industry.

And Global Geophysical Services, Inc.'s bonds were seen ending the week in the mid-50s - a few points up from the lows to which they had plummeted earlier in the week after the Missouri City, Texas-based provider of seismic services to the energy industry had warned investors that most of its financial reports issued over the past several years contained accounting errors, could not be relied upon and would have to be re-stated.

Momentive moves lower

A trader said that Momentive "bonds were active, and originally traded down a bunch."

He cited renewed speculation among investors that the company may be planning to enter into a restructuring process - or perhaps even file for bankruptcy - sometime soon. Such speculation has been mentioned from time to time in the market over the last few weeks, occasionally given new life by news stories, although so far the company has given no official hint of any such developments.

He said there was another such story in the market on Friday, "and that was what caused some reaction."

He saw the company's 11½% notes due 2016 get as low as the mid-20s, before coming off their lows to settle around 30.

"They were still down a few points at the end of the day," he noted.

"Everything else was kind of unchanged."

He saw the company's 9% notes due 2021 trading down as well, falling into the high 70s before coming back to end around 83 bid.

"So they really kind of snapped back from those initial down trades."

And he said the company's first-lien 10% notes due 2020 "actually finished higher on the day," around 106½ bid, and its 8 7/8% first-liens due in 2020 were also up.

Momentive "got banged up a bunch" a second trader said, noting that "there's noise out there about restructuring and filing."

Such speculation is nothing new - he pointed to news out a month ago that Momentive's creditors were already preparing for such an eventuality, with the holders of its $635 million of 9% second-lien notes due 2021 retaining Houlihan Lokey as restructuring advisors and Milbank, Tweed, Hadley & McCloy LLP as legal counsel.

A market source said that Momentive's bonds were the most actively traded issues in an otherwise relatively sleepy Friday session in Junkbondland , with the 111/2s having racked up over $34 million of volume heading into the close. He quoted those bonds nearly 5 points lower on the session at 29¾ bid.

Momentive's 9% notes meantime ended about ¾ point lower at 82½ bid, he said, with over $24 million of those bonds having changed hands.

Among the first-lien bonds, he saw the 8 7/8s gain ¾ point to end at the 107 level, on turnover of more than $20 million, while the 10s closed up 1 point at 1061/2, with over $10 million having traded.

Walter rebounds, a little

A trader saw Walter Energy's new 11%/12% second-lien senior secured PIK toggle notes due 2020 rebounding from the lows they had hit on Thursday, going home around 941/2, which he called up ½ point on the day.

Walter had priced $350 million of the notes at par late Wednesday as part of an upsized $550 million two-part drive-by new issue; when the bonds began trading on Thursday, traders saw them nosedive all the way down to the 94 bid level before bottoming out down there.

The trader meanwhile saw the other half of that new deal - the $200 million the 9½% add-on senior secured bonds due 2019 - firm to between 102 and 102½ bid. Those bonds had priced at 101.5 on Wednesday to yield 9.147%, after the tranche was upsized from an originally announced $100 million. While the PIK notes were getting killed, the add-ons held their own Thursday, staying around the 101½ bid mark.

And he saw the company's unsecured 8½% notes due 2021 "move back up to 65," from prior levels around or below 64; they had fallen about 4 or 5 points on Thursday, along with the PIK paper. Over $10 million of those 8½% notes changed hands on Friday.

Trying to figure out what went so wrong with the PIK issue, the trader said "I don't know if [investors] just took it because they wanted to play in the 91/2, and then puked them [the PIK] notes back up - but it was certainly mis-priced" by coming at par.

A second trader, though, said the PIKs continued to trade "down in the 93-94 area."

Global Geophysical firms

A trader said that Global Geophysical's bonds were trading in the 56 to 57 area, with about $3 million or $4 million changing hands.

He said there was "a lot of odd-lot buying and selling" going on, and here and there, a large-sized trade.

With the bonds having traded in size as high as 573/4, before going out around 57½ - a trader said "they had a pretty good week" - considering they had bounced back from lows around 50 earlier in the week.

There were numerous odd-lot trades happening in a 56 to 58 bid context - up from 50 bid but well below the levels around 76 at which the bonds traded before the company made its announcement about having to restate several years of past results.

Global Geophysical said on Tuesday that its financial reports for each of the fiscal years ended Dec. 31, 2012, 2011, 2010 and 2009 and for the first, second and third quarters of 2013 "should no longer be relied upon because of accounting errors resulting from material weaknesses in the company's internal controls."

Quiet market otherwise

Elsewhere among normally active distressed or underperforming names, a trader said "things were pretty quiet across the board," with market participants paying attention to "mostly basketball," as the televised college basketball championship preliminary rounds continued.

He did see Clear Channel Communications bonds "better on the day," quoting its 14% notes up 1 point around the par bid level.

"I didn't see any news out" about the San Antonio, Texas-based media company, "but those were definitely better on the day.

"Just a sleepy Friday," he said.

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