Clear Channel falls on add-on news; OPTI Canada subs take a dive; Sino-Forest regains ground

By Stephanie N. Rotondo

Portland, Ore., June 8 - The distressed debt market was feeling the pressure once again on Wednesday, following in the downward footsteps of the equity markets.

Clear Channel Communications Inc. announced it would bring an add-on to its 9% notes due 2021. The news resulted in softness in the company's debt, including the 9% notes, as investors pushed paper around to make room for more.

In even more distressed credits, OPTI Canada Inc.'s subordinated issues took a hit, falling about 2 points or more on the day. However, there was no news out to cause the decline.

Sino-Forest Corp. meantime managed to regain a bit of ground, though a trader did note that activity in the name was starting to wane.

After Tuesday's closing bell, Hovnanian Enterprises Inc. reported earnings that were well below expectations. As such, the homebuilder's bonds inched lower in midweek trading.

Clear Channel dips with add-on

Clear Channel Communications announced a $750 million add-on deal to its 9% notes due 2021 Wednesday. As a result, the company's bonds - including the 9% notes - declined.

A trader said the 9% notes fell to 96½ from previous levels around "98 and change." The 11% notes due 2016 were also down, to 91 from 92.

He said that the weakness was due in part to players jockeying positions around in the wake of the add-on, and in part because of pricing activities on the new deal.

Another trader called Clear Channel debt a point weaker, the 11% notes at 91 and the 5½% note due 2014 at 90.

Upon issuance of the add-on, the issue will total $1.75 billion principal amount. Proceeds will be used to refinance debt and for general corporate purposes.

Clear Channel is a San Antonio-based multimedia company.

OPTI takes a hit

OPTI Canada's subordinated paper "got beat up pretty good," according to a trader.

He quoted the 7 7/8% and 8¼% notes due 2014 at 42 bid, 43 offered.

Another trader called the 7 7/8% notes down 2½ points to 43.

There was no news out on the Calgary, Alta.-based oilsands producer that would have caused declines in the debt. However, CIBC Markets Inc. analyst Andrew Potter reportedly urged investors to avoid the company's stock, given uncertainty surrounding the company's strategic alternatives review. Potter opined that OPTI could elect to do a debt-for-equity swap that would value the stock at as little as 30 cents.

The stock (Toronto: OPC) slipped a Canadian cent to C$0.17.

Sino recoups some losses

A trader said that trading volume in Sino-Forest was weakening, even as the bonds regained a couple of points.

"It has been all over the place," the trader said. "It seemed like there was definitely a slow-down in volume in those."

He saw the 10¼% notes due 2014 trading around "64-ish," up from the low-60s.

Another trader said the 10¼% notes were the most active Sino issue, seeing the bonds gain more than 2 points to close around 641/4.

The Hong Kong- and Ontario-based tree farming company said Wednesday that the Ontario Securities Commission has opened an investigation into the trading activities of the company's stock in the wake of a controversial research report published by Muddy Waters Research.

Sino has also requested that the Toronto Stock Exchange and the Investment Industry Regulatory Organization of Canada investigate the trading of the company's shares by Muddy Waters, LLC and its principal Carson Block and anyone associated with these persons in advance of the issuance of the report.

It will also request an investigation by the Singapore Exchange Ltd. in respect to the trading of the company's bonds.

Late last week, Muddy Waters issued a report alleging that the company's statements regarding its land holdings in China did not match Chinese city records and that its stated production figures may be inaccurate. Sino has refuted the claims, going so far as to post supporting documentation on its website.

On Tuesday, Moody's Investors Service said it was considering cutting its rating on the company.

Hovnanions falls on numbers

Hovnanian Enterprises' debt "has been under pressure," according to a trader.

"They came out with some numbers that were pretty weak," he said. He called the bonds down 2 to 3 points, the 8 5/8% notes due 2017 around 65 and the 11 7/8% notes due 2015 at 76½ bid, 78 offered.

The Red Bank, N.J.-based homebuilder posted a net loss of $72.7 million, or 69 cents per share, for the three months ending April 30. That compared with a loss of $28.6 million, or 36 cents per share, the year before.

Analysts polled by Bloomberg had anticipated an average loss of 55 cents per share.

Revenue dropped to $255.1 million from $318.6 million and net orders fell 17% to 1,166 new homes.

Gross margin came to 14.8%, down from 17.3%.

Broad market softens

Elsewhere in the market, Caesars Entertainment Corp.'s 10% notes due 2018 dipped a deuce to 891/2, a trader said.

The trader also saw MGM Resorts International's 7½% notes due 2016 slipping nearly 2 points to end around 96.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.