OPTI Canada bonds weaker; First Data dips on new issue; Ameristar Casinos slips on sale rumors

By Stephanie N. Rotondo

Portland, Ore., Aug. 11 - The distressed debt market began trading down on Wednesday, likely in sympathy with the equity markets.

"The market was probably down a point across the board," a trader said, noting that shorter maturities lost about half a point, while longer issues dropped 1½ points, generally speaking.

Still, it was "a busy day," he said.

"There was huge volume today," another trader commented.

"Tonight will really be key to the market," the trader added. If overseas' equities "bomb, it's going to be kind of ugly [on Thursday]," he said. "That's my guess."

With the market being on the weaker side, OPTI Canada Inc. and First Data Corp.'s new issues did not do so well. Both companies' new bonds were seen straddling the issue price, while the old notes dropped. OPTI debt lost as much as 5 points on the day, though First Data was only down about a point.

Meanwhile, Ameristar Casinos Inc. saw its paper losing value in the wake of news that the company had hired advisers to explore its strategic options. Market chatter is that the company might end up putting itself up for sale.

Investors leery of new OPTI bonds

OPTI Canada unleashed a new deal into the marketplace during the midweek session, causing its outstanding issues to fall 3 to 5 points, according to market sources.

One trader saw the 8¼% notes due 2014 falling 3 points to around 85, while the 7 7/8% notes due 2014 dropped 5 points to 821/2.

"[The new issue] is coming in front of them, so [investors] didn't like it much," he said.

Another source placed the 8¼% notes at 82½ bid, 83, down from opening levels around 85. The source also pegged the 7 7/8% notes at 82 bid, 83 offered, down from 86 bid, 87 offered.

The Calgary, Alta.-based company launched a $100 million issue of first-lien senior secured notes due 2012 - an add-on to the $425 million of 9% first-lien senior secured notes due 2012 that came in November 2009 - and a $300 million issue of first-lien senior secured notes due 2013 on Wednesday.

Pricing on the add-on was 99.51, with a 9.228% yield. The other new issue came at 96.5, with a 9¾% coupon and an 11.162% yield. According to one trader, the new bonds were trading at "issue bid."

The note offering, which was done via a Rule 144a placement, will allow the company to "maintain sufficient liquidity through the ramp-up period of the Long Lake Project and to allow the company to continue with its previously announced review of strategic alternatives," according to a press release.

OPTI intends to use the proceeds to pay down bank debt and for general corporate purposes.

First Data dips on new issue

In other new issue news, First Data's new $510 million issue - upsized from $500 million -had some trouble upon its entrance to the market, a trader said.

"It was definitely a tough market to bring anything in," he said, referring to the overall weaker market.

The trader said the new 8 7/8% first-lien senior secured notes due 2020 were "wrapped around the issue price [of 98.387], which I guess isn't terrible."

Another trader also said the new notes were "straddling issue" pricing. He added that the old bonds, such as the 10.55% and 9 7/8% notes due 2015, were softer in trading, with both closing around 791/2. The 11¼% notes due 2016 were also weaker around 71.

Proceeds from the Rule 144a note sale will be used to repay senior secured term loans, the company said in a press release.

Last week, the Atlanta-based company said it was looking to amend its bank credit agreements. The revision would "provide us the additional flexibility to extend our borrowings, execute various refinancing alternatives to address future upcoming maturities, and take action to improve our overall capital structure," Ray Winborne, chief financial officer, said during an earnings conference call held on Tuesday.

The company said it had received the needed consents on Tuesday. The amendments required that First Data raise $500 million to repay some of its bank borrowings.

Ameristar slips on sale rumors

Ameristar Casinos lost some ground in Wednesday trading after the market learned the company had hired Lazard Ltd. and Bank of America Merrill Lynch as financial advisers, and Gibson, Dunn & Crutcher LLP as legal adviser to evaluate "strategic alternatives to enhance stockholder value."

A trader said the 9¼% notes due 2014 were "kind of active," but about a point lower at 105¾ bid, 106½ offered.

Another trader placed the paper around 1061/4, calling that down "about a point, maybe three-quarters."

Among the potential "alternatives" for the Las Vegas-based casino operator is selling the company. Several potential buyers have eyed the company since 2006, when the company's founder Craig H. Neilsen died.

A Bloomberg report quoted Union Gaming Group LLC analyst Bill Lerner as opining that the upcoming lapse in estate taxes could be "the motivation for a more formal sale process at this time."

The estate of Neilsen holds about 55% of the outstanding equity.

"We speculate that tax considerations may be motivating the move now," wrote Gimme Credit LLC analyst Kim Noland in an afternoon note to clients. "Our concern is that private equity might try a debt-financed acquisition and somehow weasel out of the change of control put."

Noland also said that another regional competitor - including Boyd Gaming, which has been "shopping," she said - could be a potential buyer, but that "we think most of Ameristar's competitors have their plates full."

Chemtura sets loan pricing

Chemtura Corp. released price talk on its $300 million six-year term loan B of Libor plus 400 bps with a 1.5% Libor floor and an original issue discount of 98 to 99, according to a market source.

The loan was launched on Tuesday. However, at that time, price talk was left as still to be determined until ratings emerged.

The price talk that came out on Wednesday is based on an expected Ba3 corporate rating and Ba1 facility rating, the source said -which ended up proving accurate as Moody's released the ratings later in the day.

Bank of America, Barclays and Citigroup are the lead banks on the deal, with Bank of America the left lead.

Proceeds will be used for exit financing.

Other funds for Chemtura's emergence from Chapter 11 will come from a $275 million five-year senior secured asset-based revolver and $450 million of notes.

According to court filings, pricing on the revolver is expected to be Libor plus 325 bps if availability is less than $100 million, Libor plus 300 bps if availability is $100 million to $200 million, and Libor plus 275 bps if availability is greater than $200 million.

Bank of America is the administrative agent the ABL facility.

Chemtura is a Middlebury, Conn.-based manufacturer and seller of specialty chemicals and polymer products.

Broad market declines

Among other goings-on in the distressed realm, NewPage Corp.'s 11 3/8% notes due 2014 fell "almost 2 points," a trader said, closing around 861/2.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 meantime slipped "about a point" to end around 35.

Sara Rosenberg contributed to this article

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