Endeavour skips interest payments, bonds drop; MHP gains on Ukrainian peace hopes; NII weakens

By Stephanie N. Rotondo

Phoenix, Sept. 3 – It was another down day for the distressed debt space, but liquidity in the wider high-yield universe was much improved over the past few weeks, a trader said Wednesday.

“$2 billion [in total high-yield trading volume, which includes distressed],” the trader said. “We’re back!”

Endeavour International Corp.’s debt was considerably weaker on the day after the company said it would not make interest payments on three series of notes. Instead, the company said it wanted to engage in talks with creditors to find a longer-term solution for its capital structure.

In the emerging market space, Ukrainian chicken producer MHP SA was on the rise as Russia and Ukrainian leaders prepare for peace talks in Minsk on Friday.

Both sides have expressed optimism that a deal can be worked out. Hostilities in the Ukraine resulted in a temporary shutdown of one of the company’s breeding farms.

Endeavour skips coupon

Endeavour International’s debt dropped quite a bit in Wednesday trading after the company said it was skipping coupon payments on its 12% first-lien notes due 2018, its 12% second-priority notes due 2018 and its 6½% convertible bonds due 2017.

The total payment came due Sept. 1 and would have equaled $33.5 million.

On the news, a trader said the 12% second-priority notes were down 5 points from the end of August, trading at 42½.

Another market source pegged the issue at 42 bid, 42½ offered, down from previous levels with a 48 handle.

The source also saw the 5½% notes due 2016 dropping to 25. The rarely traded issue last moved in round-lots back in June, at levels around 46.

Yet another trader said the 12% first-lien notes were “down a couple points, trading in the high-80s.”

“We believe it is in the best interest of all stakeholders, debt and equity, to expeditiously address the company’s capital structure with the goal of reducing debt and the cost of capital to position the company for the future,” the company said in a prepared statement.

Endeavour has now entered a 30-day grace period. During that time, the company is hoping to come up with a plan to deal with its debt structure. If it should fail to get a plan in place within the 30 days, creditors can force an acceleration of the debt.

MHP up as peace looms

MHP, a Ukrainian poultry producer, saw its 8¼% notes due 2020 gaining ground on Wednesday, according to a trader.

The trader said the paper was up “1 and change” points at 83¾.

The improvement came as both Russian President Vladimir Putin and Ukrainian President Petro Poroshenko separately expressed hope that the two sides could reach a truce deal at talks in Minsk on Friday. The truce would bring an end to hostilities in the Ukraine.

On Aug. 8, MHP announced that it had temporarily suspended operations at its Shahtarska Nova breeding farm on Aug. 1, due to “active hostilities” in the area.

Among other emerging market names, Chilean supermarket operator SMU SA’s 7¾% notes due 2020 finished the session at 66, up 1 point from the last trades that took place about a month ago, a trader said.

NII bonds weaker

A trader said NII Holdings Inc.’s bonds were “a bit weaker” on the day, though on no fresh news.

The trader deemed the 7 7/8% notes due 2019 down 1½ points to 64, while the 7 5/8% notes due 2021 slipped half a point to 15.

Another trader pegged the 7 5/8% notes at 14 5/8, off nearly a point. The 10% notes due 2016 were seen at 27¼, down a deuce from previous levels.

And, the 8 7/8% notes due 2019 declined just over a point to 28½, the trader said.

“It was just one trade though,” he said.

The Reston, Va.-based provider of Nextel mobile services in Latin America and Mexico missed a nearly $119 million coupon payment on Aug. 15, just days after reporting dismal quarterly results and warning of a potential bankruptcy filing. Upon missing the payment, the company entered into a 30-day grace period. Without a forbearance or some other plan in place, creditors could force the company into a default.

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