Skilled Healthcare debt sees boost; OPTI pressured by wider loss; ATP steady, oil leak capped

By Stephanie N. Rotondo

Portland, Ore., July 15 - Distressed bonds "hung in there while stocks were down," a trader reported Thursday.

Still, he noted that while "prices were still getting better generally," the market "fizzled out" in terms of volume, barely crossing the $1 billion mark in total volume.

Skilled Healthcare Group Inc. is seeking a stay on proceedings related to a 2006 lawsuit. The parties involved in the case have agreed to take the matter to mediation, which could possibly save the company a bankruptcy filing. As such, the nursing home operator's debt headed up during Thursday's session.

OPTI Canada Inc., however, saw its bonds falling anywhere from 1 to 3 points on the day. The bonds fell after the company reported earnings that were less than the market had anticipated.

And, after BP plc's latest attempt to squelch a gushing oil well in the Gulf of Mexico, ATP Oil & Gas Corp. debt was pretty much steady, though other credits in the sector were largely higher. According to one source, ATP has "deeper concerns" than the oil leak.

Skilled Healthcare debt boosted

Skilled Healthcare Group debt traded up following news the company was headed into mediation regarding a 2006 lawsuit.

A trader saw the 11% notes due 2014 ending around 85, which compared to its intraday high around 87 and low around 831/2. On the day, the bonds gained about 5 points, he said.

Another source placed the paper around 841/2, also up a five-spot.

In the bank debt, a trader quoted the term loan 92 bid, 94 offered, up from 91½ bid, 93 offered, and by a second trader at 91½ bid, 93½ offered, up from 91 bid, 93 offered.

Specifically, the legal battle involves a complaint that was filed in 2006 that claims some of the company's California-based facilities were understaffed and misrepresented the quality of care provided in their facilities.

The mediation stipulation is subject to approval by the Humboldt County Superior Court of California, and was scheduled to be submitted to the judge on Thursday.

Under Skilled Healthcare's mediation stipulation, from now through Aug. 9, the plaintiffs have agreed not to seek to convert the previously announced jury verdict in the litigation to a judgment, nor to try and get control over the company's property.

Also through Aug. 9, the company has agreed not to transfer or otherwise impair its assets outside of bankruptcy, and not to file for Chapter 11.

Earlier this month, a jury ruled that the company should pay $613 million in statutory damages and $58 million in restitution to the plaintiffs, and the jury had yet to hear the punitive damages phase of the trial. At that time, the company issued a statement saying that it was disappointed with the judgment and that it intended to fight it.

Skilled Healthcare is a Foothill Ranch, Calif.-based healthcare services company.

Wider loss pressures OPTI

OPTI Canada debt fell at least 1 to 2 points in Thursday trading, as the company posted a wider-than-expected quarterly loss.

A trader called the 7 7/8% notes due 2014 down "almost 2" at 871/4, while the 8¼% notes due 2014 fell 1½ points to 873/4.

"There wasn't a lot of action in it considering [the earnings release]," he remarked.

Another market source placed the 7 7/8% notes at 86½ bid, 87½ offered, down from 89 bid, 89½ offered. The source also saw the 8¼% notes at 87 bid, 88 offered, down from 88½ bid, 89½ offered.

For the second quarter, the Calgary, Alta.-based oil sands developer posted a C$152 million net loss, or C$0.54 cents per share. For the same period of 2009, net loss was C$9 million, or C$0.04 per share.

Revenues, however, improved 79% to C$61 million, due in part to increased bitumen production.

Still, according to analysts polled by Thomson Reuters, both net loss and revenue missed market expectations, as analysts had predicted a loss of C$0.15 per share on revenue of C$66.7 million.

OPTI said its larger net loss was a result of a C$104 million loss from foreign exchange translation.

The company said it was continuing to look at its strategic alternatives to enhance shareholder value, but did not disclose any details.

ATP hangs in there

Elsewhere in the oil and gas sector, ATP Oil & Gas' notes were about unchanged to "a bit better," depending on whom you asked.

One trader said about $20 million to $30 million of the Houston-based company's 11 7/8% notes due 2015 changed hands. He added that the bonds were "still just kind of sitting" around a 72-73 context.

"I would have thought that they would have run [up] a little bit," he said, given the news that BP plc had stopped the gushing well in the Gulf of Mexico for the first time since the Deepwater Horizon rig exploded and sank on April 20. But he noted that ATP has "deeper concerns" than the oil spill, specifically the moratorium on offshore drilling.

"There are more things that can go wrong than right," he said. "People are still going to be cautious with that one."

Still, he added that despite the potential issues, ATP was a credit he liked.

At another desk, a trader said the bonds inched up slightly to 73 bid, 73½ offered.

Earlier in the week, ATP's equity came under pressure as analysts opined that the company would need to raise more money than previously expected in order to generate free cash flow by 2012.

Meanwhile, Anadarko Petroleum Corp.'s paper finished up "basically flat to up a half," a trader said.

The trader quoted the 6.45% notes due 2036 at 87 bid, 87½ offered. The benchmark 5.95% notes due 2016 ended with a 95 handle, he added, on $40 million to $50 million traded.

Sara Rosenberg contributed to this article

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