OPTI Canada debt remains strong; Lehman firms on claims settlement plan; Nebraska Book gains

By Stephanie N. Rotondo

Portland, Ore., May 31 - Distressed debt traders dealt with a subdued marketplace Tuesday, as players returned from the extended weekend, only to jump right in to month-end pricing.

Still, "it felt a little better," a trader said of the overall market.

OPTI Canada Inc.'s bonds continued to gain ground, breaking 50, traders said. The debt has been firming since the middle of last week, when OPTI's joint venture partner offered positive comments about the project.

Meanwhile, Lehman Brothers Holdings Inc.'s paper headed upward after the firm announced a plan to settle its derivatives claims.

OPTI still firming

A trader said OPTI Canada's subordinated issues - the 7 7/8% and 8¼% notes due 2014 - were "up some more," trading "over 50.

"So that's a few extra points," he said.

Another trader also saw the paper "straddling" 50.

"I wouldn't say they were very active," he noted. "But they were definitely a little bit higher."

On Thursday, Nexen Inc.'s chief financial officer made some positive comments about the Long Lake project in which OPTI owns a 35% stake.

"We should expect to see positive cash flow here any day," said Kevin Reinhart during a presentation at the UBS Global Oil and Gas Conference in Austin, Texas. "So we don't have to wait for a year or two before we start getting some cash back from that."

Earlier this year, OPTI said it was unlikely that the Long Lake project would hit its 2011 production target, as operational issues have continued to pose problems.

The project has capacity of 72,000 barrels per day. On May 19, OPTI said average daily production was as 28,000 barrels.

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

Lehman trades higher

Lehman Brothers' debt traded up on news the company was looking to settle some of its derivatives claims.

A trader placed the 6 7/8% notes due 2018 at 263/4.

The now-defunct investment bank unveiled its plan on Tuesday to settle with 13 of its "big-bank counterparties."

"If you could do that, it would help speed things towards a resolution," the trader said of the company's bankruptcy case.

The settlement would allow Lehman to use a valuation method that would reduce its derivatives claims.

Nebraska Book gains

A trader said Nebraska Book Co. Inc.'s 8 5/8% senior subordinated notes due 2012 were "all over the place."

He saw the Lincoln, Neb.-based textbook distributor's bonds going home at 83 bid, 84 offered, down from its peak level for the session of 88 bid - but well up from Friday's levels around 77-78.

He said he saw "no-no-no no news" out on the company that might explain the bonds' gyrations.

Broad market mixed

Elsewhere in distressed, a trader said DirectBuy Holdings Inc.'s 12% notes due 2017 "still seem a little better," pegging the notes at 43 bid, 45 offered.

Another trader called Caesars Entertainment Corp.'s 10% notes due 2018 unchanged around 93.

The trader also saw McClatchy Co.'s 6 7/8% notes due 2029 slipping a bit to 621/2. He said the dip could be profit taking.

And, Catalyst Paper Corp.'s 7 3/8% notes due 2014 closed up over a point at 54, according to a trader.

Paul Deckelman contributed to this article

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