Distressed debt dominated by OPTI after earnings, operations update; NewPage 'super subs' gain

By Stephanie N. Rotondo

Portland, Ore., Feb. 10 - OPTI Canada Inc. once again became the nom du jour on Thursday after the company released its quarterly earnings and gave an operational update.

The subordinated issues immediately plummeted 7 points on the earnings and subsequent conference call, but managed to come back a bit, ending down about 4 to 4 ½ points on the day.

During the conference call, company executives did not speak about the financial results, but instead focused on its operations. Management said it was committed to recognizing value for shareholders, but that it was difficult to foresee exactly how that would happen.

"We are dealing with a balance sheet and liquidity issue, not an asset value issue," said Chris Slubicki, president and chief executive officer, in the earnings release. "We are working to demonstrate the value in our asset base in order to complete a transaction in 2011."

Away from OPTI - and another glut of new issues - NewPage Corp.'s 12% "super subs" due 2013 traded in "decent" size, a trader said. The bonds were also up, while the rest of the company's debt was holding steady. It wasn't clear what drove the 12% notes higher, as the issue rarely moves.

There was meantime no trading in Blockbuster Inc. on the back of reports that the company was thinking of selling itself. The company's subordinated notes currently trade at pennies on the dollar.

OPTI crashes post-numbers

OPTI Canada debt was the "most active bonds by far," according to a trader.

He said the 7 7/8% and 8¼% notes due 2014 were "going crazy" after the company announced its fourth-quarter and full-year results. The paper dropped "7 points right off the bat," but managed to regain a little ground, ending the day just 4½ points weaker.

He pegged the issues around 481/2.

Another trader said it was OPTI's "biggest day yet," with $500 million to $600 million of the company's assorted issues trading.

"A whole set of people dumped out of them and a whole new set of people got involved," the trader said.

The subordinated issues experienced "huge swings" in price, he added, seeing a low-tick in the 7 7/8% notes of 411/2. By the end of business, the bonds closed around 48 bid, 48½ offered.

The senior issues, however, "didn't budge," the trader said, and trading in those issues was light.

He quoted the 9% first-lien notes due 2012 at 99 bid, 99½ offered and the 9¾% first-lien notes due 2013 at 97½ bid, 98½ offered.

The Calgary, Alta.-based oilsands producer reported C$81 million in revenues for the fourth quarter, compared with C$43 million in the same quarter of 2009. Net loss narrowed to C$26 million, or 9 cents per share, from $212 million, or 75 cents per share, the year before.

For the fiscal year, net loss was C$274 million, versus C$306 million in 2009. Revenues were C$250 million, up from C$143 million the previous year.

As of Dec. 31, OPTI had C$363 million of cash and equivalents, including a C$190 million revolving credit facility. The company withdrew C$90 million from that facility in January.

OPTI also held a conference call on Thursday, but management refused to discuss anything but its operating results.

The company started 2010 positively, as production ramp-up was "on track," according to Slubicki. But that momentum ceased in August, resulting in less-than-anticipated production.

Back in November, OPTI had forecast production would be around 38,000 to 45,000 barrels of bitumen per day in 2011. However, operational problems have resulted in much less output.

"With the delays we have faced, achieving this forecast is a risk unless operations improve in the near term," Slubicki said.

Slubicki added that the company remained committed to reviewing its strategic options alongside its advisors, Scotia Waterous Inc. and TD Securities Inc. and Lazard Freres & Co. LLC.

NewPage 'super subs' trade

A trader said a "decent hunk" of NewPage's 12% notes due 2013 traded during Thursday's session.

He called the trading activity "interesting" as the "super subs" rarely move.

He saw the notes closing around 31, up 2 to 3 points.

Another trader also saw the 12% notes trading with a 31-handle, also up 3 points. The 10% notes due 2012, however, were unchanged around 65 3/8.

Neither trader knew why the 12% paper suddenly traded. The only news out was from a paper industry tome, which reported that NewPage and Verso Paper Corp. were likely not planning to merge.

NewPage is a Miamisburg, Ohio-based coated papermaker.

Market buzz: Blockbuster

The Wall Street Journal reported that Blockbuster was planning to put itself up for sale after the company's creditors could not come to terms on a bankruptcy exit plan.

Despite the news, a trader said there was "not a single trade and not a single price" in the Dallas-based movie rental chain's debt.

That was not too surprising, as the bonds trade at cents on the dollar.

The Journal article cited sources familiar with the matter and also noted that Carl Icahn and a group led by Monarch Alternative Capital LP were the frontrunners of potential buyers.

It is speculated that an offer could be around $300 million, plus the assumption of store leases and other liabilities.

Broad market mixed

Elsewhere in the distressed space, a trader said Clear Channel Communications Inc.'s 5½% notes due 2014 traded up half a point to end at 901/2.

Another trader said Sprint Nextel Corp. bonds were weaker across the board, seeing the 6 7/8% notes due 2028 ending 2 points weaker at 90.

The second trader also saw Solo Cup Co.'s 8½% notes due 2014 slipping a point to finish around 90.

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