OPTI's new issues weigh on old notes; Blockbuster's future murky; NewPage notes drifting lower

By Stephanie N. Rotondo

Portland, Ore., Aug. 12 - Distressed bonds performed "similar" to Wednesday, a trader reported Thursday.

Some names attempted a comeback, he noted, but others continued to languish.

For example, OPTI Canada Inc.'s outstanding paper slipped another few points on the day. The new bonds, however, were seen climbing above par.

Blockbuster Inc. canceled its second-quarter conference call late Wednesday, citing its ongoing recapitalization negotiations. While the news did little to shake up the bonds, it did cause the rumor mill to churn with opinions as to how the company goes forward.

Meanwhile, NewPage Corp.'s paper remained soft in trading. The company recently reported a significantly wider loss than the previous year.

And, Realogy Corp.'s bonds were on the weak side, as well. The company posted its earnings earlier in the week. The numbers were fairly positive, but the company expressed caution about the housing market for the remainder of 2010.

OPTI's new issues weigh on old notes

OPTI Canada's "old" bonds continued to weaken under the pressure of a new issue added to the company's capital structure, according to market sources.

One trader said the second-lien paper - the 8¼% notes due 2014 and the 7 7/8% notes due 2014 - was "crushed another 3 to 4 points," seeing them fall under 80. He noted that the bonds had lost 8 to 9 points in the last two sessions.

The new bonds, however, "did fine," the trader said. He called the new issues up 2 to 3 points, with both the 9% add-on notes and the 9¾% notes "up and down" around 101.

Another source quoted the 8¼% notes wide at 80 bid, 82 offered, down from 82 bid, 83 offered.

The new debt broke for trading on Wednesday and the Calgary, Alta.-based oil sands producer's older issues immediately went downward. A trader opined that the investors were not pleased with the new deal, as it was placed ahead of the old bonds.

Proceeds from the offering will be used to "maintain sufficient liquidity through the ramp-up period of the Long Lake Project and to allow the company to continue with its previously announced review of strategic alternatives," the company said in an Aug. 11 press release. The company intends to use the funds to pay down bank debt.

Blockbuster's future murky

Dallas-based movie rental chain Blockbuster canceled its second-quarter earnings call, resulting in more market chatter as to the company's future.

"I've always thought that Blockbuster is a company that should trade at zero," a trader said. The bonds are currently not far off, as he estimated the 9% notes due 2012 were trading "up and down 5." According to the Finra Trace bond-tracking system, the bonds have been trading around 8, though in odd-lots.

"They are definitely not an 8," the trader said.

The trader also pegged the 11¾% notes due 2014 around 60.

In a press release published late Wednesday, Blockbuster said it was canceling its quarterly conference call "in light of the sensitive nature and fluid, rapid pace of ongoing negotiations related to its recapitalization."

The company added that it would file its 10-Q with the Securities and Exchange Commission later in the week.

The canceled call comes just one day before a forbearance agreement was set to expire. The company had entered the grace period on July 1 when it missed a coupon payment on its 11¾% notes. Creditors agreed to give the company a little more time than the typical 30-day period, but there has been no update on how the recapitalization talks are going.

To that end, the trader said he believes a bankruptcy filing is imminent.

"The longer they wait, the less opportunity they have to extract any value," he said.

NewPage notes drifting lower

NewPage paper remained weak in Thursday trading, losing "a couple points," on the day, a trader said.

The trader placed the 11 3/8% notes due 2014 in the mid-85 range, while the 10% notes due 2012 were seen around 46.

At another desk, a source pegged the 11 3/8% notes at 85½ bid, 86 offered, down from 86½ bid, 87 offered. The 10% notes were also quoted lower at 43 bid, 43½ offered, compared with opening levels around 46.

Last week, the Miamisburg, Ohio-based company reported a second-quarter net loss of $174 million, versus a $6 million loss the year before.

On Thursday, The Daily Press reported that negotiations between the company and its United Steel Workers Union had been put off until Sept. 7.

Realogy under pressure

Second-quarter results from earlier in the week continued to weigh on Parsippany, N.J.-based Realogy.

A source saw the 10½% notes due 2014 drifting to 83 bid, 84 offered from 84½ bid, 85½ offered, while the 12 3/8% notes due 2015 softened to 75 bid, 76 offered from 76 bid, 77 offered.

The real estate company reported its earnings on Tuesday, posting a 23% increase in revenue from the year before at $1.3 billion. Net income came to $222 million.

However, the company was cautious about the remaining portion of the year.

"The strong earnings and cash balances we achieved in the first half of 2010 should provide cushion to counter the weakening industry outlook for the second half of the year," said Anthony Hull, Realogy's chief financial officer, in the earnings release.

"Clearly, Realogy had a strong second quarter, and we are pleased with our operating and financial results for the period," said Richard A. Smith, chief executive officer, in the release. "Looking forward, however, it is shaping up to be a difficult third quarter because of the expiration of the Homebuyer Tax Credit and an uncertain near-term outlook for the economy.

"While we are faced with a challenging housing market in the second half of 2010, Realogy will continue focusing on what we can control," added Smith. "This strategy includes executing on strategic growth opportunities while maintaining our focus on costs."

Still, market watchers were slightly more optimistic.

"Despite our longer term concerns, we acknowledge that Realogy's operating results are likely to continue improving for at least the next six months," wrote Gimme Credit LLC analyst Evan Mann in an afternoon note to clients.

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