NewPage again the nom du jour, subs drop another 6-7 points; OPTI Canada bonds break under 50

By Stephanie N. Rotondo

Portland, Ore., May 13 - Friday the 13th was definitely a no-win day for NewPage Corp.'s bonds, according to market sources.

The company had released earnings on Thursday, which then resulted in a 10- to 12-point loss for the second-lien notes. The slide continued Friday and the negative follow-through pushed the paper down another 6 to 7 points on the day.

The senior paper was also weaker, but much less so than the subordinated notes. Additionally, a trader said that volume in the NewPage complex made up a significant portion of the total trading in the secondary realm.

Also losing ground was OPTI Canada Inc. Those bonds fell about 3 points, falling under the 50-mark. However, there was no fresh news out to drive the debt lower.

A going-concern warning meantime put pressure on Evergreen Solar Inc.'s 4% convertible notes. The notes were trading in the low-teens.

NewPage notes in tailspin

NewPage's bonds continued to dive following the company's earnings release on Thursday.

A trader said about "a couple hundred million" of the NewPage complex turned over, which he noted was "pretty significant," given that total trading volume in the secondary space was right around $1 billion.

The trader saw the 10% second-lien notes due 2012 dropping another 6 to 7 points - on top of the 10 to 12 points lost Thursday - to end at 40 bid, 40½ offered. The 11 3/8% first-lien notes due 2014 also fell, losing about 3 points to close at 96 bid, 96½ offered.

"The seniors are fine," the trader said. "The subs are going to flounder for awhile.

"If they get forced into a liquidity event and they have to file, those subs lose value pretty quickly," the trader added.

Another trader quoted the 10% notes at 40 bid, 41 offered and saw the 11 3/8% notes "straddling" 97.

"They've been melting pretty good," he said. "I think it's going to be hard to avoid a restructuring. It certainly seems like it's going to be heading that way."

A third trader pegged the 10% notes at 40 bid, 41 offered and the 11 3/8% notes around 96.

In its Thursday earning release, the Miamisburg, Ohio-based coated papermaker reported net sales of $904 million, up from $817 million the year before. The company attributed the increase to higher prices and higher sales volumes.

Adjusted EBITDA was $85 million, versus $15 million for the first quarter of 2010. Net loss narrowed to $88 million from $175 million.

At the end of the quarter, NewPage had $170 million of liquidity, consisting of $9 million in cash and equivalents and $161 million available under its revolving credit facility.

Though the numbers were in some ways better than 2010 comparables, they were well below analysts' estimates and weak cash flow called the company's refinancing options into question.

NewPage must repurchase or refinance the 10% notes by Jan. 31, 2012 to repay or refinance the debt or else its 11 3/8% senior notes due 2014 will be accelerated, moving the maturity up to March 2013 from December 2014.

Also in the paper realm, a trader said Catalyst Paper Corp.'s 7 3/8% notes due 2014 were down 3 points to the 61 level. He said there was "no specific news" out on the Richmond, B.C.-based papermaker, but speculated the losses were carry-over from the NewPage negativity.

OPTI subs 'crack'

A trader said OPTI Canada's subordinated notes - the 7 7/8% and 8¼% notes due 2014 - "finally cracked," trading below the 50 mark.

He placed the paper at 47 bid, 48 offered.

"They were drifting and I think people started to wake up to the fact that you have, in a best case scenario, dead money for a few years and worst case, you have zero," he said.

A second trader said the bonds were trading "plus/minus" 48, noting that he saw a "low tick" of 471/2.

He said the bonds had previously traded around 50 bid, 51 offered.

Yet another source quoted the subs at 47½ bid, 48½ offered, calling the bonds down 4 points.

There was "no news other than all distressed credits [were] down on light volume today," the third source said. "Not a lot of dealer support would be my guess."

Late last month, the Calgary, Alta.-based oilsands producer reported its first quarter earnings and also warned that it would likely not meet its 2011 production target.

For the quarter, OPTI lost C$27 million, or 9 Canadian cents per share, versus a los of C$41 million, or 15 cents per share, the year before.

Revenues were higher at C$63 million and production was 25,000 barrels per day.

OPTI and its Long Lake joint venture partner Nexen Inc. are attempting to hit 72,000 bbl/d.

"We are at a very critical point in OPTI's brief history," Chris Slubicki, chief executive officer, told shareholders at the company's annual general meeting on April 27. "We must complete our strategic alternatives process this year. We must complete an asset or a corporate transaction in 2011 or we will have to recapitalize our balance sheet. The status quo is not sustainable."

Evergreen Solar converts decline

Evergreen Solar's 4% convertibles traded down to 13 on Friday, down from 14½ on Thursday, as the underlying shares of the Marlboro, Mass.-based solar company sank following a filing in which it said there is substantial doubt about its ability to continue as a going concern.

The convertibles are putable in July 2013. There is $203.8 million outstanding.

Evergreen also has 13% convertibles, of which there is $165 million outstanding, that weren't heard in trade. And Evergreen's 4% convertibles due 2020 have only $12.6 million outstanding.

"I think it was the going concern language in the 10-Q which they haven't used before in the 10-K," a Connecticut-based sellside analyst said of the slide.

In addition, however, it was a weak quarter and there was also an inventory writedown, or a $17 million adjustment to inventory, that was concerning, the analyst said.

"The loss was a little worse than expected. Adjusted EBITDA was worse than the Street seemed to be expecting," the analyst said.

Nevertheless, Evergreen was weak going into Friday, given that in March it shut its factory and dismissed about 800 workers and the state's economic assistance agency sought to rescind $58 million in incentives the company was awarded in 2007.

The company said its survival depends on obtaining additional financing from third parties and a successful restructuring of at least a substantial portion of its debt.

It warned last month it may need to raise cash to continue operations after first-quarter sales fell short of expectations.

Dex debt dips

A trader said Dex One Corp.'s 12% notes due 2017 fell 3 to 4 points to finish at 52 bid, 53 offered.

There was no news out on the Cary, N.C.-based phonebook publisher.

Rebecca Melvin contributed to this article

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