Distressed debt market heads upward; Sprint dubbed day's biggest loser; OPTI bonds lose ground

By Stephanie N. Rotondo

Portland, Ore., Dec. 7 - Distressed debt had a positive day in trading on Monday, according to traders, but sellers were still outnumbering buyers.

"Everything is up and nothing is for sale," a trader said. Investors "are wrapping it up as we get closer to year-end."

The trader also noted that bonds were "up half a point to a point depending on what name it was."

While most credits were up on the day, Sprint Nextel Corp. was dubbed the day's "biggest loser," as the company's debt dropped almost 2 points in trading. The losses came just one day after the company announced its plan to upgrade its network, leaving some to wonder if Sprint one day hopes to shed its 4G network partner.

OPTI Canada Inc. was also on the losing side. The bonds slipped in trading after the company released its 2011 capital expenditure program.

Harrah's Entertainment Inc., on the other hand, experienced a 3-point gain on the day. Traders said the bonds were very active, though there was "no particular news" out.

Among other gainers was Dex One Corp., whose bonds increased about 2 points. The struggling phonebook publisher is believed to be a prime takeover target, especially with recent gains in its stock.

Sprint: the biggest loser

Sprint Nextel debt was one of the few losers in an otherwise up day, according to traders.

One trader deemed the credit the day's "biggest point loser," as its 6% notes due 2016 dipped nearly 2 points to 961/2, on $20-plus million traded.

However, he also saw the 8 3/8% notes due 2017 inching up slightly to close around 108 1/8, also on about $20 million traded.

Another market source saw the 6% notes declining a point to 971/2, while another called the paper "down a good point, point-and-a-half" around 961/2.

The latter source also pegged the 8 3/8% notes around the 108 mark, calling that "active, but only up 3/8," while the 6 7/8% notes due 2028 finished half a point softer at 873/4.

On Monday, Sprint announced that it would spend up to $5 billion to upgrade its network and also planned to shutter its Nextel iDEN network by 2013. The upgrades would allow Sprint to incorporate 4G technology or other wireless technology into its own network, while also compiling all of its various spectrums into one single base.

It is expected that the work will bring in at least $10 billion in savings.

The news is causing a few market players to wonder what will become of Sprint's Clearwire Corp. collaboration.

"Over time Clearwire may not be as important to Sprint as was formerly thought," wrote Gimme Credit LLC analyst Dave Novosel in an afternoon report to clients.

Sprint currently relies on Clearwire for its 4G network.

Sprint Nextel is an Overland Park, Kan.-based wireless telecommunications provider.

OPTI bonds drifting lower

A trader said OPTI Canada bonds were "pretty active," though he noted that the notes had "drifted in" by the end of business.

He said the 8¼% notes due 2014 opened near 731/2, but closed closer to 71 bid, 72 offered.

Another trader called the notes down half a point around 72.

On Tuesday, the Calgary-based oilsands producer announced its 2011 capital program, which includes about C$150 million in capital expenditures. Of that number, C$122 million is expected to be used on the company's joint venture with Nexen Inc., the Long Lake Project.

At a credit conference last month, both Nexen and OPTI told conference attendees that production at the project would be less that previously estimated. However, OPTI also noted that its ability to post a profit would largely depend on how the project fared.

Additionally, OPTI has been considering its strategic options for the better part of the year.

Harrah's gets a boost

While Sprint bonds were on the losing side of the street, Harrah's Entertainment's debt was on the winning side.

A trader said the 10% notes due 2018 jumped 3 points to end around 91. Another saw the issue opening around 88½ bid, 89 offered and closing around that 91 level, on "no particular news."

Last month, the Las Vegas-based casino operator canceled a planned initial public offering, but went ahead with a name change. The company is now called Caesars Entertainment Inc.

Fitch Ratings gave the newly named company a mixed review, saying that while the company was "highly leveraged," it also had a "solid liquidity position."

Fitch gave the company a CCC rating, with a stable outlook.

Dex debt trades up

A market source said Dex One's 12% notes due 2017 improved over 2 points to 621/4.

Another trader said most of the day's trades occurred between 61 and 62, though he saw markets of 62 bid, 63 offered later in the day.

"The stock has been performing well," he said.

Dex's stock (NYSE: DEXO) popped over 15% in Tuesday trading, ending at 7.28, up from 6.26 on Monday.

Dex One is the new name of R.H. Donnelly Corp., which emerged from bankruptcy protections in February. However, the yellow pages publishing business has yet to rebound and there are still concerns about the Cary, N.C.-based company.

Last week, a market source told Prospect News he had heard Dex was considering merging with SuperMedia, which operates Superpages.com. Given the stock's recent gains, it is becoming a widely held belief that a merger could occur and most likely before the company announces its earnings in February.

Papermakers do well

NewPage Corp. was "definitely better," according to a trader, who pegged the 10% notes due 2012 at 62 bid, 62½ offered.

The 11 3/8% notes due 2014 were also "up some" around 94.

Another trader deemed the 10% notes 3 points better around 621/2.

Elsewhere in the paper and wood products realm, Bowater Inc.'s 6½% notes due 2013 climbed over 2 points to close at 35½ bid.

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