OPTI Canada saga shines spotlight on distressed market; Mohegan Tribal sees pickup in activity

By Stephanie N. Rotondo

Portland, Ore., Feb. 3 - A distressed debt trader said Thursday's session was "without a doubt the busiest non-new issue day I've seen in awhile."

Instead of focusing on new issues, investors remained fixed on the ongoing OPTI Canada Inc. saga, which continued to unfold as the company held a bondholder conference call. Though one market source deemed the call "useless and meaningless," that didn't stop the bonds from gyrating within a 12-point range, eventually closing up slightly from Wednesday levels, but still down from recent highs.

Meanwhile, Mohegan Tribal Gaming Authority's bonds have been getting more attention recently. The gaming group recently said it had hired financial advisers to go over its books.

Also, Eastman Kodak Co. paper was on the stronger side following an investor conference call on Thursday.

In market gossip, rumors are circulating that Ahern Rentals Inc. has hired someone to assess its restructuring options. The bonds have not been very active recently, but several market players believe that something needs to be done to improve the company's situation.

OPTI takes a ride

OPTI Canada's debt gyrated Thursday, as the company held an investor call to discuss its recent developments.

A trader said the subordinated paper - the 7 7/8% and 8¼% notes due 2014 - "rallied back" to 52 bid, 53 offered, which compared with levels in the mid-40s on Wednesday.

"So they've been bouncing around," he said, adding that the debt was "by far the most active thing in the market."

Another trader said as much as $400 million or more of the company's various bonds changed hands, with the subs experiencing a "more than 12-point swing" during Thursday trading. He said the notes traded as low as 41½ and as high as 56, before settling back in to 52 bid, 53 offered. When asked why the bonds were trading all over the map, the trader opined that "one guy tried to dump out all his paper," and others swooped in.

As for the senior issues, the trader said the 9¾% notes due 2013 "traded as cheaply as 91," but ended the day 97½ bid, without a right side. The 9% "super seniors" due 2012 - dubbed thus as it is believed the paper would be well-covered in the event of a bankruptcy - meantime opened around 97 bid, 98 offered and moved up to close at 98¾ bid, 99½ offered.

"[OPTI] was definitely the driving force of the day," he said.

The trader also remarked that OPTI's conference call was "useless and meaningless," though he did find it interesting that at least 300 people were on the call.

"There's no better game in town," he said.

Yet another market source called the day's movements "pretty amazing," seeing the sub notes bottom out at 44 and closing with a 55 bid.

"That's a heck of a move in a day," he said. "It's a situation that's moving so quickly."

At another shop, a trader said the bonds closed around the 52 level, which compared with midday levels of 45 bid, 46 offered.

The debt has been on a steady decline ever since the company announced it had hired Lazard Freres & Co. LLC to assess its strategic alternatives. Lazard will work alongside Scotia Waterous Inc. and TD Securities Inc., which were hired as financial advisers in November 2009.

OPTI is a Calgary, Alta.-based oilsands producer. The company is slated to release earnings next week.

Mohegan more active

Mohegan Tribal Gaming Authority's debt has "certainly been getting a little more notice of late," a trader said.

He said about $15 million of the 6 1/8% notes due 2013 turned over at 88 5/8, which he deemed "up a bit."

Another trader said the notes were "up about a point," also at 88 5/8.

Last week, the Connecticut-based gaming authority said it had hired Credit Suisse Group AG to aid in a restructuring effort. Mohegan had engaged an advisory unit of Blackstone Group LP back in November.

Kodak gains strength

Eastman Kodak's 7¼% notes due 2013 were "up probably a full point," according to a trader.

He said that "$5-odd million" of the notes traded at 951/4.

Another market source deemed the debt up over a point at 95¼ bid.

The Rochester, N.Y.-based company held an investor meeting at the New York Stock Exchange on Thursday, where company executives attempted to cajole concerned stakeholders.

"We have sufficient resources and the financial flexibility necessary to fully implement our strategy and deliver shareholder value," said Antonio Perez, chief executive officer, at the meeting.

Perez said that despite the company's recent poor earnings, he expected Kodak to turn a profit by 2012.

Market buzz: Ahern

Market buzz is that Ahern Rentals has hired another adviser to help with a restructuring effort, though the company has yet to confirm that.

"It makes sense that they did," said one market player who follows the name, but had not heard the rumor.

"They need some sort of pre-pack," he continued. "We have always felt [the bonds] are going to be equitized. They need to be."

Another follower of the credit opined that the bonds are worth about 10 cents on the dollar - well below the 57 bid, 58 offered market traders gave on the 9¼% notes due 2013 on Thursday.

The source blamed Wall Street bullishness on all things construction related and on how much money investors were throwing at distressed opportunities.

The economic crisis and the popping of the housing bubble hurt the Las Vegas-based construction equipment rental company and remaining weakness in the industry is not helping. In July, Ahern hired Oppenheimer & Co. to review its financial options.

Lehman up, TXU steady

Elsewhere in the land of distressed, a trader said Lehman Brothers Holdings Inc.'s 6 7/8% notes due 2018 were "better" trading around 26.

Another trader said Energy Future Holdings Corp.'s 10¼% notes due 2015 were "kind of indifferent" at 62½ bid, 63 offered. He noted that about $20 million of the bonds traded.

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