Investors keep working out Sino-Forest debacle; National Bank of Greece preferreds fall again

By Stephanie N. Rotondo

Portland, Ore., June 6 - Sino-Forest Corp. remained a credit on the tip of everyone's tongue as the company released information Monday intended to refute last week's allegations of fraud.

Still, the news did not help the bonds regain the 30-plus points it lost last week. But buyers were reported to be coming back in.

National Bank of Greece SA's preferred stock meantime gave up its Friday gains on chatter about what a potential restructuring of the country's debt might look like. The preferred shares had moved up on Friday after the country got an OK to draw on its European Union-International Monetary Fund bailout funds.

Sino-Forest still raging

Sino-Forest bonds continued to be "the name everybody's talking about," a trader said.

"That's getting creamed," another trader said. "But over the last 24 hours we've definitely seen some buying of the bonds, particularly the 2011 tranche. Distressed players are stepping in. We traded some 2014s today in the 67 to 70 context and then had better buyers of the 2011s, with a range of 80 to 85."

Another market source deemed the debt mixed, seeing the 10¼% notes due 2014 close at 68 bid, 69 offered, after hitting a high of 108 and a low of 62.

The paper had closed 69 bid, 70 offered on Friday.

The 6¼% notes due 2017 meantime traded up to around 65, versus 60 bid, 61 offered on Friday.

After losing major ground on Thursday and Friday, the Hong Kong and Ontario-based forest products company attempted to recoup its losses by releasing documents on its Chinese assets, as well as information on its cash balances.

Last week, a research report put out by Muddy Waters Research in Hong Kong - operated by known short-seller Carson Block - said the company overstated its holdings in China and that its wonky financial reporting was tantamount to fraud. Sino-Forest denied Block's claims on Friday, but also indicated that it was going to fully investigate the matter.

Paulson & Co., an investor of Sino-Forest, is also reportedly investigating the claims.

Greek bank falls again

After regaining some ground on Friday, National Bank of Greece's 9% series A preferreds (NYSE: NBGPA) traded back down.

The preferreds fell $1.20 to $12.25.

According to a market source, the dip came on the back of a news report by the Wall Street Journal that indicated banks were being "encouraged" to allow the country to skip payments on preferreds and debt.

"It's certainly nothing official," the source said. "It's hard to say exactly what that means but it's probably not good."

On Sunday, European Central Bank Governing Council member Nout Wellink said that banks are being asked to roll over their Greek debt at maturity, according to a Reuters report.

"We are trying, in what is called in official terms the Vienna initiative, to persuade banks to stay in those countries after 2012 and when debt matures to keep active in those countries," Wellink said. "I think the governments of Europe temporarily need to make available some additional refinancing money."

France has already said they approve of such a plan.

"France is favorable to a solution which would involve the private sector in ways that wouldn't endanger the banking sector or the funding of the Greek economy," said an official in the Journal on Monday.

On Friday, Greece was given approval to draw on its bailout funds received from the European Union and the International Monetary Fund. However, there are still more hurdles to jump in order for the country to get the needed funds, leaving more uncertainty about whether or not it will get the money.

Broad market mostly softer

Elsewhere in the world of distressed debt, a trader said it was "much of the same."

As oil fell "a couple bucks," OPTI Canada Inc.'s subordinated debt - the 7 7/8% and 8¼% notes due 2014 - slipped to 46.

Dex One Corp.'s 12% notes due 2017 were also weaker around 44, the trader said.

DirectBuy Holdings Inc.'s 12% notes due 2017 also "continue to weaken," the trader said, placing the paper at 39 bid, 40 offered.

On the positive side, Nortel Networks Ltd.'s 10¾% notes due 2016 were "up a quarter-point or so" at 931/4.

Christine Van Dusen contributed to this article

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