Distressed market active for a Monday; OPTI Canada heads back up; Chemtura paper gets stronger

By Stephanie N. Rotondo

Portland, Ore., Oct. 25 - It was a "normal volume looking day" for the distressed debt market on Monday, according to a market source.

Another trader said it was "extremely active certainly for a Monday" with about $1.5 billion in total secondary market turnover. "And it seemed busier than that."

The second trader added, "Everything was up today, that's for sure."

The generally positive tone of the marketplace helped OPTI Canada Inc.'s debt recoup the losses incurred Friday. There was still no news out to explain the sudden surge in investor interest, though the company is expected to release quarterly results later this week.

Chemtura Corp. bonds were also firmer, continuing the upward climb that started Friday. Those gains had come as the bankruptcy judge overseeing its case approved the company's plan of reorganization.

Reports of a new issue helped to perk up MGM Resorts International Inc.'s debt. The bonds were seen up as much as 2 points on the day as the company readied to sell $500 million of debt to pay off upcoming maturities.

And, NewPage Corp. continued to grind higher, with nary a word of news to be found. One trader opined that general "positive momentum" had continued to the paper's gains.

OPTI recoups losses

OPTI Canada notes traded "pretty active" yet again, according to a trader.

The trader called the bonds up 1¼ to 2 points on the day, the 8¼% notes due 2014 at 72¾ and the 7 7/8% notes due 2014 at 721/2.

Another trader said a "good hunk" - about $20 million to $25 million - of the 7 7/8% notes turned over at 72 bid, 72½ offered.

"They went right back up after being pushed down on Friday," the trader noted.

There hasn't been any news out on the Calgary-based oilsands producer, though quarterly results are expected to come out later this week.

Chemtura still rising

Chemtura paper gained more ground, continuing the trend begun on Friday after a bankruptcy judge approved the chemical maker's plan of reorganization late Thursday.

One trader said the bonds improved anywhere from 3 to 6 points on the day, the 6 7/8% notes due 2016 around 134 and the 6 7/8% notes due 2026 around 132.

"Friday was their busy day," another trader said, though he also said the notes were "definitely both up" from levels around 128-129 on Friday.

He also placed the 2016 notes at 134 and the 2026s at 132.

Chemtura's debt had gained 10-plus points on Friday upon word of the plan's approval. The bankruptcy judge also rejected claims made by an equity committee that the plan undervalued the company.

MGM bets on new issue

News of a $500 million bond sale resulted in "a lot" of trading in MGM Resorts International debt, traders reported.

A trader said about $100 million to $150 million of the Las Vegas-based casino operator's notes changed hands, with the 6¾% notes due 2012 being the most active. That paper was closed at 98 bid, 98¾ offered.

Another trader placed the 6¾% note around 99, up over a point, while the 5 7/8% note due 2014 gained a deuce to end with a 91 handle.

MGM is selling $500 million of 10% six-year notes - priced late Monday at 98.867 with a 10¼% yield - to repay part of the $1.2 billion in debt coming due next year. The sale comes just barely a week after the company completed a public stock offering that raised over $511 million.

"MGM continues to hack away at near-term maturities," wrote Barbara Cappaert, an analyst at KDP Investment Advisors, in a note to clients. "We would be aggressive buyers at this level."

"The significant refinancing and capital raising efforts by MGM over the last 18 months have better positioned the company to survive its liquidity crunch and create a more sustainable capital structure," Fitch Ratings said in a statement issued Monday, in which the rating agency also said it had upgraded the company's outlook to positive from stable.

"MGM continues to demonstrate solid access to capital despite the distressed nature of the credit profile."

However, Fitch did note that the financing could be "largely leverage neutral" and that it could also "dampen the free cash flow profile slightly due to higher interest costs, depending on pricing of the notes."

'Positive momentum' helps NewPage

NewPage's 11 3/8% notes due 2014 ended the day "up more than a point" around 95¾ bid, 96¼ offered, a trader said.

The 10% notes due 2012 meantime gained "at least a point" to close around 621/2.

"They were only at 50 a week or two ago," he said of the subordinated issue. "They had a nice run."

The Miamisburg, Ohio-based papermaker has seen its bonds steadily climbing up over the last few weeks, though there hasn't been any news to act as a catalyst.

When asked his thoughts on why the debt has grown so popular, the trader remarked, "At 50, it says it is basically a coin toss [as to whether they can make it as a company or not]. What has happened is there has been just enough positive momentum [in the general marketplace] that [investors] have decided it's not really a 50/50 crapshoot."

He speculated that the 10% notes could climb as high as 70 "and then they'll sit there for awhile."

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