Distressed debt pressured by Malaysian Air crash; Verso’s exchange offer fails to entice

By Stephanie N. Rotondo

Phoenix, July 17 – The distressed debt market took a dive Thursday after news outlets reported that a Malaysian Airlines plane carrying 295 people went down in the Ukraine.

How the plane crashed was unclear, as it was reportedly flying in unrestricted airspace, but allegations were flying that it was shot down by pro-Russian separatists.

“The market has been heavy, today in particular,” a trader noted. “There is bid-wanteds galore.

“The consensus seems to be that things are down half a point, ETF names are down even more,” he said.

Verso Paper Corp. bonds drifted downward as the early deadline for an exchange offer tied to its NewPage merger expired. Based on the debt received by the deadline, the company has still not met its minimum threshold needed to complete the exchange and therefore the merger.

“Verso continues to believe that the consummation of the exchange offers is in the best interests of all Verso stakeholders and is an important step toward completing our acquisition of NewPage,” said Dave Paterson, Verso’s president and chief executive officer, in a press release.

“If we cannot complete the exchange offers, Verso will be forced to consider alternative actions.”

Bondholders can still participate in the exchange, which expires midnight July 30.

Meanwhile, 21st Century Oncology Inc. paper got “clobbered” during the session. A trader remarked that the name has “been quite volatile” recently, especially as Medicare and Medicaid said it could drop the amount paid to providers for cancer treatment equipment.

Fannie Mae and Freddie Mac preferred stock was boosted Thursday, as a trio of House Democrats proposed a bill to deal with the two agencies, both of which are currently under government conservatorship.

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