Opti Canada bonds fly up on stake sale; Charter Communications, Freeport paper remain active, better

By Stephanie N. Rotondo

Portland, Ore., Dec. 17 - Opti Canada Inc. was perhaps the biggest mover in the distressed bond market, traders reported Wednesday.

The company announced a stake sale to its joint venture partner during the mid-week session. Opti said that the move was necessary to fund upcoming debt payments. Investors reacted positively to the news, resulting in a 10- to 15-point gain in the bonds.

Meanwhile, Charter Communications Inc. and Freeport-McMoRan Copper & Gold Inc. remained on the top of the most active list. Charter's debt was seen as much as 8 points better, while Freeport also inched higher. But other than news already reported, there was nothing to explain either's activity.

Bond traders said the market was decidedly higher Wednesday, despite a slightly weaker stock market. Still, traders noted that trading was "spotty" and possibly a symptom of the impending holiday slowdown.

Opti bonds fly up on stake sale

Opti Canada announced it was selling most of its stake in its Alberta Long Lake project to its partner Nexen Inc., a move seen as necessary for the company to meet its debt obligations.

The news seemed to encourage investors, sending the Canadian company's bonds up 10 to 15 points on the day.

One trader said the bonds "flew up" on the back of the news, its 8¼% notes due 2014 closing up at 53 bid, 55 offered from the low-40s.

Another source pegged that issue at 55 bid, 57 offered, a 15-point gain. The source also saw the 7 7/8% notes due 2015 at 51 bid, 54 offered, up 10 points.

The oil-sands producer said it was selling about 65% of its share in the project for C$735 million and will retain a 35% working interest. The company said the sale, which will give the company a C$300 million loss for the quarter of closing, will help pay off a C$150 million revolving bank loan and to partially pay off another credit facility, reducing it to C$350 million from C$500 million.

Charter, Freeport remain active

Charter Communications and Freeport-McMoRan's debt continued to be considered the most active traders during the mid-week session.

And, Charter's bonds got as much as an 8-point boost, traders reported. One saw the 8¾% notes due 2013 at 53, up from around 45 the day before. The trader added that about $30 million of the paper traded.

Another trader said the issue had "a pretty good move," finishing around 52 from 45 bid, 46 offered previously.

Freeport's debt was also better, at least by a couple points, a trader said. He pegged the 8 3/8% notes due 2017 at 75. At another desk, a trader placed the bonds at 75.5, up 2 to 3 points.

Charter's bonds began to gain some momentum - at least where volume is concerned - last week when the St. Louis-based cable provider said it had begun talks with bondholders regarding a potential restructuring. The debt initially fell on the news, but has been climbing back up over the last couple of days.

Meanwhile, Wednesday marks about two-straight weeks of Freeport making the most active list. The Phoenix, Ariz.-based copper and gold miner said earlier this month that it had elected to cut its dividend program and planned to slash output, as declining metal prices had weighed on the bottom line.

Like Charter, Freeport's debt first reacted by dropping a considerable amount. However, the bonds have slowly but steadily been recouping those losses.

Broad market 'spotty,' winding down

While traders called the day mostly better, activity was also deemed "spotty," in the words of one market player.

"It was so all over the place," he said. He added that "there was some stuff trading," but there seemed to be little rhyme or reason to it.

And though "in general things felt better," the looming holiday season was blamed for the spotty day.

"From [Thursday] on, I think it will be hit or miss," another trader said.

Of the "here-and-there" names mentioned, Huntsman Corp.'s term loan recouped a lot of the losses that it experienced earlier on in the week when it ended the merger agreement with Hexion Specialty Chemicals Inc., and the only thing traders could point to behind the positive momentum Wednesday was market technicals.

The term loan was quoted at 55 bid, 57 offered, up from Tuesday's levels that were in the 48 bid, 53 offered type of range, traders said. At the end of last week, before the termination of the merger was announced, Huntsman's term loan was quoted at 59 bid, 62 offered.

One trader remarked that everything was better on Wednesday, saying that, for example, NRG Energy Inc., a Princeton, N.J.-based owner and operator of diverse power generation portfolios, saw its strip of term loan and letter-of-credit facility debt quoted at 85¾ bid, 86¾ offered, up from 83½ bid, 84½ offered.

The trader went on to say that the Dow Jones Industrial Average was up more than 300 points on Tuesday and the loan market couldn't catch a bid, so even though stocks were a little weaker on Wednesday, maybe loan levels were having a delayed reaction to Tuesday's equity strength.

"[Or] maybe some guys buying loans into year-end. I have no idea," the trader added.

Elsewhere, a trader saw D. R. Horton Inc.'s 6¼% notes due 2016 trade at 59.

The trader also saw "very little" going on in the way of GMAC LLC, except the short paper. He dubbed the 5.85% notes due 2009 unchanged at 88.5.

Pilgrim's Pride Corp.'s bonds were "exactly where they were yesterday," a trader said. He quoted the 7 5/8% notes due 2015 at 26 bid, 27 offered and the 8 3/8% notes due 2017 at 5 bid, 6 offered.

A trader called price action in Neiman Marcus Group Inc.'s bonds "pretty much sideways," its 10 3/8% notes due 2015 at 38 bid, 39 offered and its 9% notes due 2015 at 43 bid, 44 offered.

MGM Mirage's bonds firmed some. The 13% notes due 2013 headed higher to 93 bid, 94 offered.

Sara Rosenberg contributed to this article.

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