Distressed market starts week strong; OPTI seniors fly, subs settle in; Nebraska Book declines

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., Feb. 7 - The distressed debt market began the week with a firm feel, traders reported Monday, though at lest one trader saw signs of "Super Bowl hangover."

"It was a strange day," he said. "We had reasonable volume, but there were not real huge trades.

"But the market is up," he added.

"The market just kept going up," said another trader, who figured the market was up a point generally.

There were not even huge trades in OPTI Canada Inc., which last week had been all the rage, trading in massive size. However, a trader did note that while last week's attention was focused on the subordinated notes, Monday's attentions were on the senior paper.

Elsewhere, Nebraska Book Co. Inc. continued to lose weight, though there has been no news out on the textbook reseller, nor its parent, NBC Acquisition Corp.

On the flip side, Clear Channel Communications Inc. remained on an upward path, which a trader deemed "carryover from Friday." The parent company of the multimedia company did announce its quarterly results and also said it was planning a new issue.

OPTI settling in

OPTI Canada bonds did not trade as much as they were last week, after the company announced it had hired Lazard Freres & Co. LLC as a financial adviser.

However, a trader remarked that the senior notes were the ones getting the most attention during Monday's session.

"OPTI seniors flew," he said, seeing the 9% notes due 2012 at 99¾ bid, par ¾ offered and the 9¾% notes due 2013 at 97½ bid, 98½ offered.

And while last week saw "hundreds of millions" of the subordinated issues changing hands, Monday saw just $10 million of the 7 7/8% and 8¼% notes due 2014 turning over, according to the trader.

He called the subs unchanged, to fractionally lower, at 53 bid, 54 offered.

"I think it's kind of settled in," he said.

Another trader deemed the bonds generally unchanged, but said the 8¼% notes "might be down a little bit" at 53¼ bid, 54¼ offered.

"But not very active," he said.

OPTI Canada is a Calgary, Alta.-based oilsands producer.

Nebraska Book: A coin flip

Nebraska Book Co.'s 11% notes due 2013 were "down a bunch more points," according to one market source.

He quoted the notes at 49 bid, 50 offered, down from levels around 75 just a month ago, he said.

The price of the 11% notes also differed greatly from the 10% notes due 2011, which the source said was trading near par.

"It's truly a 50/50," he said, indicating that the market thinks it's a toss-up whether or not the Lincoln, Neb.-based textbook seller would file for bankruptcy or not.

The 11% notes, he explained, "run the risk" of a "technical default," though he added that there was "nothing fundamentally wrong" with the company itself. But if the bonds default, it will be come a question of will the company cure it or instead opt to file for Chapter 11 protections.

"Nobody is really sure how it will shake out," he said.

Clear Channel gains momentum

A trader said Clear Channel Communications' bonds were "busy-ish again and up again," as Clear Channel's parent company, CC Media Holdings, Inc., reported its fourth-quarter and full-year results.

The trader estimated that about $150 million of assorted issues traded during the session, with the 5½% notes due 2016 and the 11% notes due 2016 being the most active.

He saw the former at 77¼ - up 3 points - and the latter at 99 5/8.

Another trader said he saw the notes "moving up," though he didn't have any recent levels.

"I think it's a product of anything at a discount is paying interest," the second trader said. "So people are paying special attention to add yield to their portfolio.

"Most of their debt trades at a discount," he added.

A third trader quoted the company's 10¾% notes due 2016 up between 1 point and 1¼ points, at the par level, while its 11% notes were a point better at 98¾ bid and its 7¼% notes due 2027 gained 1½ points to end at 63 bid.

"They were all up, and on good volume," he declared.

"There was volume in everything," he added, "a lot of activity in that name."

At another desk, a market source quoted Clear Channel's 5½% notes up 2½ points, at 78 bid, while seeing the 10 3/4s a point better, at par.

For the year, San Antonio-based CC Media posted a 6% increase in revenues, which came to $5.97 billion. Net loss was $623 million, versus a loss of $4.54 billion in 2009.

For the last quarter of 2010, the company saw revenues gain by 8% to $1.63 billion. Net loss was $86 million compared with $268 million for the same quarter of 2009.

Clear Channel also announced that it was planning a private placement of $750 million of priority guarantee notes due 2021. The proceeds from the offering will be used to repay outstanding debt.

In order to conduct the offering, Clear Channel also said it was attempting to amend its credit facilities to extend maturities and to allow for the issuance of new debt.

A&P notes firming

A trader saw the 11 3/8% senior secured notes due 2015 of Great Atlantic & Pacific Tea Co. Inc. up a point on the session to 93½ bid, after having "moved up over 90" on Friday from previous levels around 88-89.

A trader said Friday that the A&P bonds had been helped up by several points during that session by apparently better monthly numbers which the bankrupt Montvale, N.J.-based supermarket operator reported to the federal bankruptcy court overseeing its restructuring.

A&P said that during the month of December, its sales from its various operations, including stores under banners such as A&P, Pathmark, Waldbaums, Super Fresh and Food Emporium, totaled $621.5 million, although the company had a net loss of $104.9 million. However, A&P also reported that net cash and equivalents increased by $279.9 million during the period and stood at $372.3 million as of Dec. 31. It also said that it had used the bankruptcy court mechanism to reject 98 leases covering some of its roughly 350 stores in the Northeastern U.S. as a means of cutting company overhead.

The first trader did not see any change in A&P's busted convertible issues, the 5 1/8% notes slated to come due in June or the 6¾% notes due 2012, seeing them stuck in a 33 ½ to 35 range, trading like regular unsecured junk bonds rather than converts after its de-listed stock plunged well below $1 per share.

Sbarro mixed, Harry & David up

Sbarro Inc.'s 10 3/8% notes due 2015 were quoted in a 40-to-42 bid range by a market source.

He saw the troubled Melville, N.Y.-based Italian-style quick-service restaurant operator and franchisor's bank debt still in the high 90s, but did not see any trading in it Monday.

He said there was no real activity in the bonds - "that name is a very infrequent trader, it's only a $150 million deal. It had a flurry of activity when it went down," on last week's news that the company had chosen not to make the $7.78 million interest payment due Feb. 1 on its $157.78 million of bonds, "but then I just haven't seen anything," other than occasional smallish odd-lot trading in the 30s.

A market source saw the bonds get as low as 31½ bid during the session, on small-size trading. However, another called then down a deuce at 36 bid.

Harry & David Operations Corp.'s 9% notes due 2013 were quoted up 1½ point at 36½ bid, ahead of the Medford Ore.-based specialty retailer's expected release of final earnings data for its fiscal second quarter ended Dec. 25.

The company's bonds had slid badly last month when it released preliminary quarterly results showing results significantly below company expectations. It also warned that it would likely fall out of compliance with its credit facility covenants, and would need to restructure its debt, and announced that it had hired advisers to explore recapitalization alternatives.

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