MF Global rollercoaster continues; strong market tone helps Beazer gain; OPTI debt ends higher

By Stephanie N. Rotondo

Portland, Ore., Oct. 27 - Bond markets flew upward Thursday on news of a European debt deal, traders reported. That also helped distressed credits gain ground.

However, the general positive tone didn't help MF Global Holdings Ltd. While the bonds were up "right off the bat," a trader said, they soon lost their gains and ended the day unchanged to slightly weaker. The losses were blamed on yet another credit downgrade, this time from Fitch Ratings.

But on the positive side were names like Beazer Homes Inc. The homebuilder saw its debt climbing as a new report indicated new home sales were rising, even while existing home sales declined.

Meanwhile, OPTI Canada Inc. paper was modestly better on the back of third-quarter results and an update on its CNOOC Ltd. merger and bankruptcy case.

Berry Plastics Corp. "really caught a bid," according to a trader. He said the bonds - once "left for dead" - had staged a comeback recently and climbed to levels around par.

And, Clear Channel Communications Inc. notes were deemed "much better," by a trader, though there was no news out to act as catalyst.

MF Global gyrations continue

A trader said MF Global Holdings' 6¼% notes due 2016 traded up "right off the bat" Thursday, getting as high as 70 bid, 75 offered.

Then, "it kind of stopped," he said, and the bonds were trading down around 60 bid, 61 offered.

"They were up 15 points or so and came back down to almost unchanged to down a few," he said.

Another trader also saw the debt hit a high around 75, only to close at 58 bid, 59 offered.

"The downgrade [from Fitch] was the catalyst," he said. "They started out strong."

He added that news reports were also out regarding a potential sale of the company's futures business. The New York-based firm run by John Corzine was said to be talking to various big banks about taking over the business.

Fitch cut its rating on MF Global to BB+, its highest junk rating, citing the challenges of earning profits from interest in the current "low interest rate environment."

On Tuesday, MF Global reported a net loss of $191.6 million, or $1.16 per share, for the third quarter. That compared with a loss of $94.3 million, or $0.59 per share, the year before.

Revenues dropped 14.3% to $205.9 million.

The poor results followed a rating downgrade from Moody's Investors Service on Monday. Moody's dropped its long-term rating to Baa3 from Baa2, alleging that the firm was not properly managing risk.

Standard & Poor's placed the firm on CreditWatch with negative implications on Wednesday.

The firm is reported to have about $6 billion in European exposure. That compares with the $12 million in revenues earned from its principal trading unit in the last quarter.

Beazer climbs up

Beazer Homes' bonds were seen heading higher after a Commerce Department report out late Wednesday indicated that new home sales were on the rise.

A trader saw the 9 1/8% notes due 2019 up 6½ points to 72¼ and the 9 1/8% notes due 2018 up 5½ points at 72. The 6 7/8% notes due 2015 were up 5 points, at 811/4.

In September, new home sales moved up 5.7% to a seasonally adjusted annual rate of 313,000 homes.

The gain came after four consecutive months of declines and was attributed to a 3.1% slash in the median sales price.

Existing home sales, however, fell an unexpected 4.6% in September, according to the National Association of Realtors.

OPTI debt improves

OPTI Canada said Thursday that its takeover by CNOOC would likely close in November.

The company also released third-quarter earnings.

Traders said the Calgary, Alta.-based oilsands producer's debt was better, but on the quiet side despite the news.

One trader pegged the 7 7/8% and 8¼% subordinated notes due 2014 with a 64 handle, up about half a point each.

Another trader saw the debt around 65.

"I think 67 is what they get paid out," he said.

A third trader said the paper was "about a point better" at 64½ bid, 65 offered.

OPTI said the CNOOC acquisition would be implemented sometime in November. One trader said he heard it should be done within 30 days.

During the third quarter, bitumen production at OPTI's Long Lake joint venture with Nexen Inc. rose 6% from the previous quarter to 29,500 barrels per day.

Net loss came to C$290 million on revenues of C$87 million.

Berry catches a bid

A trader said Berry Plastics' subordinated paper "really caught a bid."

"Those bonds were [previously] left for dead," he added.

The company had said Thursday that it had repurchased $95 million of its 10¼% senior notes due 2014 and, as such, had drawn its credit facility down by $106 million.

The trader saw the 9¾% notes due 2021 gaining 2½ points to end around par 3/4, while the 9½% notes due 2018 inched up 1½ points to 1011/2.

He noted that the paper was in the mid-80s "only a short while ago."

Berry is an Evansville, Ind.-based manufacturer and marketer of plastic packaging products.

Clear Channel 'much better'

Clear Channel Communications' debt was "much better," a trader reported.

He called the 10¾% notes due 2016 up 6 points around 75 and the 11% notes due 2016 "up roughly the same" to 70 bid, 71 offered.

Another trader also saw the 10¾% notes rising, deeming them up 7½ points at 753/4.

There was no news out on the San Antonio-based multimedia company.

Caesars wins big

There was also no fresh news out on Caesars Entertainment Corp., but a trader dubbed the 10% notes due 2018 one of the "biggest movers of the day" nonetheless.

He said paper traded up to 80 bid, 8 ¾ offered "first thing" Thursday, "up a quick fiver" from levels around 75 the day before. The notes traded up to 82 only to settle back in around 79½ bid, 80½ offered.

Another market source called the bonds up 6½ points at 82 bid.

Caesars is a Las Vegas-based casino operator.

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