ATP Oil, PDVSA bonds look to recover losses; ResCap debt hangs in as Berkshire seeks examiner

By Stephanie N. Rotondo

Phoenix, June 5 - Distressed debt was "pretty mixed," a trader said Tuesday, though he added that there was a generally firmer tone.

The oil sector was recovering some of its losses from the prior week, traders reported. ATP Oil & Gas Corp. was "one of the bigger movers," one trader said, seeing the oil exploration company's bonds climbing as much as 3 points on the day.

Even Petroleos de Venezuela SA's debt inched upward, gaining about a point across the board.

There was no fresh news out on either company, though oil prices were modestly higher on the day. One trader remarked that the boost was "more technical as opposed to fundamental."

Meanwhile, Residential Capital LLC paper held its ground during the session. The company was in the news, however, as bondhodler Berkshire Hathaway Inc. sought to have an examiner appointed to the Ally Financial Inc. subsidiary's bankruptcy case.

Rally for ATP, PDVSA

The oil arena was attempting to recover some of the ground lost in the last week and half when investors were selling energy and related credits left and right.

Both ATP Oil and PDVSA were among the day's top trading names, a trader said.

For it part, ATP's 11 7/8% notes due 2015 traded up about 3 points on the day, ending around 57, the trader said. He saw about $30 million of the bonds changing hands.

Another trader said as much as $50 million-plus of ATP bonds turned over, calling the paper up "a solid 3 points" at 56½ bid, 57½ offered.

That compared to 53½ bid, 54½ offered on Monday.

"They had just been beaten down a little bit more than expected," he said when asked what had caused the gains.

"We've watched ATP do this a few times," and the 50s seem to be the bonds' lows, he said.

He therefore opined that the day's increase was "technical as opposed to fundamental."

Meanwhile, a trader saw PDVSA's bonds improving by about a point across the board. He also speculated that the improvement was based on the fact that the name had taken a hit in the previous week's downturn.

The trader pegged the 9% notes due 2021 around 721/2, on about $56 million traded. Another $15 million each of the 5 5/8% notes due 2027 and the 5¼% notes due 2017 traded, at 55 7/8 and 71, respectively.

Oil was also rebounding a bit, albeit modestly. U.S. crude prices rose 9 cents to $84.07 a barrel.

Berkshire seeks ResCap examiner

A trader said there were "some trades" in Residential Capital debt, as Warren Buffett's Berkshire Hathaway sought to have an independent examiner appointed to the company's bankruptcy case.

Still, the bonds were mostly unchanged.

The 6½% notes due 2013 and the 6 7/8% notes due 2015 were steady in a 19-20 context, he said. The 6½% notes that were to have come due this month, however, moved up 3 points to that same 19-20 area, while the 9 5/8% notes due 2015 dipped slightly to 921/2.

In a filing late Monday, Berkshire told the court overseeing the case that the relationship between ResCap and its parent Ally should be further investigated. Specifically, the investment fund wants to look into provisions that release Ally and its officers from any claims related to the case.

Berkshire - which owns about $1 billion of ResCap debt - joins another group of ResCap creditors seeking more information about the parent-subsidiary relationship. Last week, a creditor group asked the court to appoint an examiner to investigate ResCap's officers.

"What is evident - abundantly so - is that the debtors' plan fits neatly into Ally's publicly stated goal of separating itself, once and for all, from ResCap," Berkshire said in its filing. "Whether Ally's agenda also happens to be in the best interest of ResCap and its creditors is another question, one that should be a focus of a searching inquiry.

Furthermore, "Berkshire agrees with the official committee of unsecured creditors that an investigation is necessary into the debtors' prepetition transactions with Ally and its affiliates, and the settlements underlying the reorganization plan that the debtors now seek to confirm on a highly abbreviated schedule."

ResCap is a Minneapolis-based mortgage lending unit of Ally Financial.

MF, Ambac in the news

In other financial-related credits, a trader saw MF Global Futures Ltd.'s 6¼% notes due 2014 at 38½ bid, 39 offered.

He noted that the company was making headlines Tuesday, as two trustee reports had been issued. In one of the reports, a trustee estimated that creditors could have as much as $3 billion in claims against the now-defunct New York-based brokerage firm formerly run by Jon Corzine.

Both reports also touched on how assets currently in hand should be divided.

"The general tone of it was that bondholders wouldn't get anymore money until customer accounts were paid," he said.

Elsewhere, Ambac Financial Group Inc.'s debt was "not really trading," but was quoted slightly higher at 21½ bid, 22 offered, the trader said.

The New York-based bond insurer said that the rehabilitation court in Wisconsin had approved two motions on Monday that would allow it to begin paying out partial payments on claims and also allow it to exercise two call options.

Broad market mixed

In the rest of the distressed space, trading in Bon-Ton Stores Inc.'s 10¼% notes due 2014 "slowed down quite a bit" from Monday, according to a trader.

The York, Pa.-based retailer had announced plan for an exchange offer in the previous session.

He called the bonds up slightly in Tuesday trading, seeing at 74½ bid. That compared to 73½ bid, 74½ offered the day before.

At another desk, a trader said Hawker Beechcraft Acquisition Co. LLC's 8 7/8% notes due 2015 dropped "a few points" to 151/2.

And, Eastman Kodak Co.'s second-lien paper was "very active," he said, hitting a low around 61½ before settling in around 63.

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