Distressed market subdued post-holiday; Navistar bonds jump in active trading; Oi slumps

By Stephanie N. Rotondo

Seattle, Sept. 6 – News-driven names were active in distressed debt trading on Tuesday, though overall activity was muted in the wake of the long holiday weekend.

One trader said players were “trickling back in” post-Labor Day – the unofficial end of summer. But as many desks were empty for the bulk of the previous week, another trader said most were just getting back into gear.

The first trader also commented that he “heard there was a monster calendar building up in investment grade,” which could have also diverted attention from riskier credits.

But as for the day’s notables, Navistar International Corp.’s debt popped on word Volkswagen Trust & Bus was planning on taking a stake in the Lisle, Ill.-based truck manufacturer. Funds from the transaction could be used to help ease Navistar’s $5 billion debt burden, which gave the bonds a 15-point boost on the day.

Meanwhile, Oi SA, the struggling Brazilian telecommunications company, filed on Monday its recovery plan.

Under the proposed plan, Oi bondholders will receive new debt for old, at 30 cents on the dollar. Said new bonds can be converted to equity for up to 85% of the company’s shares, assuming the debt is not redeemed within three years.

That news put pressure on the company’s debt, though a trader said the paper was down only “about a point.”

Oi also said that it was considering asset sales, some of which shareholders do not agree with.

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