Distressed market holds firm; OPTI loses ground after hiring another financial adviser; GM up

By Stephanie N. Rotondo

Portland, Ore., Feb. 1 - Distressed debt traders saw a firmness in Tuesday's market, though with one major exception: OPTI Canada Inc.

"Everything else was up, up, up," said one market source.

"It was definitely the first real day of the year," opined another source.

Trading in OPTI bonds made up a large chunk of the day's total volume, with one trader estimating that as much as $400 million worth of bonds turned over. The bonds were also weaker - by about 4 points - as the company announced it had hired a third financial adviser to assess its financial situation.

Meanwhile, a 23% increase in sales helped General Motors Corp.'s debt move up about a point on the day. However, a trader said that despite the "great numbers," there was not as much trading in the credit as he would have expected.

In the "no news is good news" department, NewPage Corp.'s paper traded actively, but held in at its recent levels.

OPTI hires more advisers

While the rest of the market seemed firmer - or, at the very least, unchanged - OPTI Canada's debt dropped on news the company had hired Lazard Freres & Co. LLC to "assist in its ongoing review of strategic alternatives."

"They've been sinking," said one market watcher who dubbed the credit "an oilsands play that just hasn't played out."

He said the 7 7/8% and 8¼% second-lien notes due 2014 fell into the mid-50s, while the first-lien notes - the 9¾% notes due 2013 and the 9% notes due 2012 - were trading in the mid-90s.

Another trader said "hundreds of millions" of OPTI bonds turned over, estimating as much as $400 million of the company's various issues changed hands. "And they were everywhere," he added, seeing the second-lien paper hit a high of 61, a low of 55 and a closing market of 55½ bid, 56½ offered.

He also saw the 9% notes at 97¾ bid, 98¾ offered and the 9¾% notes at 97 bid, 98 offered.

"That was a big hunk of what people cared about," he said.

Additionally, he said that, on the high-grade side, Nexen Inc. - OPTI's joint venture partner in the Long Lake project - was also trading actively, with about $400 million of notes changing hands.

A third trader said OPTI was "quite the active bond," deeming the 7 7/8% and 8¼% notes 4 points softer around 56.

According to a company-issued press release, Lazard will work alongside Scotia Waterous Inc. and TD Securities Inc., which were hired as financial advisers in November 2009. The company has been struggling for over a year, as operational issues have beset the Long Lake project. As a result, the project has not yet been producing up to full capacity, a milestone OPTI has previously said was important to its financial health.

The Calgary, Alta.-based oilsands producer said it still intends to release its fourth-quarter earnings on Feb. 10.

GM up on January sales

General Motors' 8 3/8% notes due 2033 were "up a solid point," a trader said on "great numbers," referring to the Detroit automaker's January sales results.

He pegged the paper at 361/2, on $25 million to $30 million traded.

Another trader called the benchmark 8 3/8% notes almost a point better at 36 3/8. The 8¼% notes due 2023 were seen over half a point stronger at 35 5/8.

GM sold 178,896 vehicles in the United States during the month of January, which was a 23% gain year-over-year. The increase was due in large part to an uptick in retail sales, which were 36% higher than January 2010.

NewPage active, unchanged

A trader said NewPage bonds were "pretty active, but no different."

He saw the 10% notes due 2012 closing around 65.

Another trader, who noted that about $20 million to $25 million of the bonds traded, echoed that level.

There was no news out on the Miamisburg, Ohio-based coated papermaker.

Sbarro skips interest payment

Sbarro Inc. didn't trade during Tuesday's session, despite news that the company had elected to skip its Feb. 1 coupon payment on its 10 3/8% notes due 2015.

"They very rarely trade," a trader said. "44 [bid], 45 [offered] is the last [market] I saw that was close to real.

However, another market source saw the bonds drifting down to as low as 34, a 12-point decline day over day.

"Odd-lots are trading around 40," said another trader.

Interest payable on the notes would have totaled $7.78 million. There are $150 million of the bonds outstanding.

Also, the company said it had secured a second forbearance agreement from its lenders. The original forbearance expired Jan. 31. The company now has until March 2 to come into compliance with its first-lien credit facility.

However, the forbearance could expire early if the senior notes or the second-lien credit facility is accelerated.

An affiliate of MidOcean Partners holds about 95% of Sbarro's second-lien debt. MidOcean is also Sbarro's majority stockholder.

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