OPTI's production report again helps bonds; General Maritime worries pressure shipping sector

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., July 15 - Distressed debt was mostly better Friday.

OPTI Canada Inc.'s subordinated notes moved upward yet again, this time in response to a production update published Thursday. The senior notes, however, were holding steady.

Market sources continued to watch General Maritime Corp., whose bonds have dropped 10 points in less than a week. The debt fell 7 to 8 points Thursday alone after the company said it had amended its credit facilities.

The paper was holding in there on Friday, but it was dragging down the shipping sector at large, according to a trader.

In the world of preferred stocks, National Bank of Greece SA received a passing grade from the European stress test. As a result, the preferreds gained nearly 30% of their value back.

OPTI heads higher

A trader said OPTI Canada's second-lien notes were "a smidge better" at Friday's close.

He said the 8¼% and 7 7/8% notes due 2014 were up "a point or so" around 47.

He said the 9% notes due 2012 and the 9¾% notes due 2013 were unchanged around 102 bid, 102½ offered.

The second-liens still trade flat, or without accrued interest.

On Thursday, the Calgary, Alta.-based oilsands producer provided an update on its Long Lake joint venture project with Nexen Inc. In the statement, OPTI said its costs for the first two quarters of 2011 increased from the year before, but that it had achieved C$2 million positive net field operating margin in the second quarter.

In the first quarter, OPTI posted a C$8 million operating margin loss.

Also, bitumen production at the plant was up to 27,900 barrels per day, a nearly 2,500 barrels a day improvement over the first quarter.

Still, the company warned that it would likely not meet its forecast of 38,000 to 45,000 barrels per day.

"Through operational experience gained over time, we have improved our understanding of the Long Lake reservoir," OPTI said in a press release out Thursday. "With this experience, we recognize that a portion of our initial 90 well pairs will not meet production expectations. We are addressing this primarily by the accelerated development of well pads."

As of June 30, the company had C$189 million in cash and cash equivalents, as well as $73 million of restricted cash held in an interest reserve account tied to its $300 million of first-lien notes.

The operational update comes on the heels of the announcement that OPTI filed for creditor protection in Canada on Wednesday.

A 30-day grace period triggered by a missed coupon last month would have expired Friday, which would have meant a default for the company.

General Maritime weighs

General Maritime continued to be a "macro story for [the shipping] industry," a trader said.

The New York-based oil shipping company's 12% notes due 2017 have lost about 10 points in the last week, according to the trader. On July 11, the paper was trading around 79-80. On Thursday, the notes fell to around 70 on news the company had amended its credit facilities to reduce its minimum cash balance requirements.

The trader said the bonds were steady Friday at 70½ bid, 71½ offered.

"There's a lot of yield there if these things make it," he said. He also noted that there were "expectations of weak second-quarter numbers," as well as the belief that shipping rates would remain low in the near term.

General Maritime will release its second quarter results on July 27.

But as General Maritime was "getting whacked," it was taking other shippers with it, the trader said.

Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018, for example, dropped to levels around 95, he said, versus levels around 98½ bid, 99½ offered just a few days prior.

Greek bank gets a boost

National Bank of Greece's 9% series A preferreds (NYSE: NBGPA) shot up nearly 30% after a second round of stress test results posted by the European banking Authority showed that the bank passed.

The stock gained $1.80, or 29.61%, to close at $7.89.

The European Union banking unit announced the results of the tests around midday on Friday. The results showed only eight banks failing, two of which were in Greece.

For its part, National Bank passed an adverse scenario test with a capital ratio of 7.7% of Tier I capital.

Dynegy debt dips

A market source saw Dynegy Inc.'s 8 3/8% notes due 2016 trading around 733/4, with about $11 million trading.

The 7½% notes due 2015 meantime traded around 731/4, on volume of about $6 million as of midday.

Dynegy is a Houston-based energy producer.

Lee loan up

Lee Enterprises Inc.'s term loan gained some ground in trading with news that the company is targeting a refinancing of its $1 billion of debt before maturity in April 2012, according to a trader.

"We are in substantive and productive discussions with key lenders about an extension of our credit agreement and fully expect a satisfactory outcome, though the process will likely take several months", said Mary Junck, Lee's chairman and chief executive officer, in a news release.

Following the announcement, the company's term loan was quoted at 83¼ bid, 84¼ offered, up from 82½ bid, 83½ offered, the trader said.

In April, the company said that it would repay substantially all of its existing debt with proceeds from $1.055 billion in new senior secured notes and the sale of up to 8,928,175 shares of common stock. However, the bond and stock deals were pulled in May as a result of market conditions.

Lee Enterprises also said on Friday that it has been notified by the New York Stock Exchange that its 30-trading-day average share price has fallen below the $1.00 minimum standard and the deficiency will need to be cured within six months for continued listing.

"We believe that investor sentiment will improve when questions about our refinancing are resolved, especially as our revenue outlook strengthens," Junck remarked in the release.

The company expects to record an impairment charge related to the decline in its stock price when it reports results on Aug. 5.

The charge has no impact on cash flows, but will reduce reported earnings, resulting in a loss for the quarter.

Lee Enterprises is a Davenport, Iowa-based newspaper publisher.

Nebraska Book DIP breaks

Nebraska Book Co. Inc.'s debtor-in-possession financing facility made its way into the secondary market, with the $125 million term loan B quoted at 101½ bid, 102 offered on the open and then it moved down to par ½ bid, 101 offered, according to a trader.

Pricing on the B loan is Libor plus 600 basis points with a 1.25% Libor floor, and it was sold at an original issue discount of 99.

During syndication, pricing was lowered from Libor plus 700 bps and the discount firmed at the tight end of the 98½ to 99 talk.

The company's $200 million one-year DIP also includes a $75 million ABL revolver priced at Libor plus 350 bps with no Libor floor

J.P. Morgan Securities LLC is leading the deal that will be used by the Lincoln, Neb.-based retailer and wholesaler of college textbooks for general corporate purposes during its Chapter 11 process.

Paul Deckelman contributed to this article

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