ATP Oil & Gas paper remains weak in response to numbers; ResCap heads higher, MF Global falls

By Stephanie N. Rotondo

Portland, Ore., Nov. 10 - The distressed debt market was already gearing up for the long holiday weekend Thursday and, as a result, volumes were hampered.

"It doesn't seem like all that much paper traded," a trader said.

ATP Oil & Gas Corp., however, continued to be busy after reporting earnings on Wednesday. The oil producer's debt had fallen 6 to 7 points after the release and dropped another 6 to 7 points come Thursday.

In other recently topical names, Residential Capital LLC paper was "probably a little higher," according to a trader. MF Global Holdings Ltd. was meantime seen closing modestly weaker.

ATP losses mount

A trader said ATP Oil & Gas "has been a pretty volatile one," after the company reported earnings on Wednesday.

He saw the 11 5/8% notes due 2015 hitting a low around 66 before coming back to close at 69 bid, 70 offered. That was still down from 76 on Wednesday and from levels near 84 just a couple days ago, he said.

Another trader said the debt was "getting bamboozled." At the lows, he saw markets of 65 bid, 66 offered, but the notes finished at 69½ bid, 70 offered.

The trader noted that the issue was the "top mover" of the day and that at least $80 million of notes changed hands.

"That's big," he said.

Another trader said that ATP was "by far the biggest" volume mover on Thursday, with an astounding more than $120 million having traded on Trace by day's end, which estimated was around 10% of all the activity in the junk market.

"They got killed again today and then bounced off the bottom" - he saw the bonds fall as low as 66 bid, before going out at 68¾ bid. He said the bonds - which had fallen to around 76 on Wednesday from prior levels in the 80s - opened the day Thursday at 77, trying to edge their way back up, "but then they dropped like a rock" to the lows, before bouncing a little off that bottom, "so it was quite a fall" over the last two days.

He said that from what he had seen of the earnings, "I didn't think the numbers were that bad - but since the end of the quarter, production has dropped, and people must not like their explanation."

Yet another trader who saw the ATP bonds fall opined that "in this market, if there's any kind of bad news, it's not like a pimple - it's more like brain cancer, and you become deathly ill."

The Houston-based oil exploration company on Wednesday posted a net loss of $5.6 million, or 11 cents per share, versus a loss of $58.4 million, or $1.15 per share, the year before.

The company said the narrowed loss was due to increased production from new wells. The company is relying heavily on said new wells to increase revenues in order to raise its cash flow.

In September, Moody's Investors Service has claimed there was a "high likelihood" the company would have to restructure, given its high debt levels. For its part, the company has said it should have more than enough funds to service its debt obligations.

ResCap up, MF Global slips

ResCap has been topical of late, as news outlets have reported that its parent company, Ally Financial Inc., is considering a bankruptcy filing for the money-losing unit.

The news initially sent ResCap bonds down about 20 points, but on Thursday, a trader said the debt had managed to gain ground.

He called the 9 5/8% notes due 2015 "probably a little better" at 58 bid, 59 offered.

Among other recently notable names, MF Global's 6¼% notes due 2016 were slightly weaker at 341/4, according to a trader.

Broad market mixed

Elsewhere in the distressed debt market, Caesars Entertainment Corp.'s 10% notes due 2018 fell in early trading by half a point, but came back to close "kind of unchanged" at 70 bid, 71 offered, a trader reported.

Another trader said Bon-Ton Stores Inc.'s 10¼% notes due 2015 "continued to dip a little bit," pegging the paper at levels "just below 70."

And, he said Dynegy Holdings LLC's 8 3/8% notes due 2016 were unchanged at 74.

Paul Deckelman contributed to this article

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