GM debt declines in sympathy with equity; OPTI bonds gyrate, NewPage notes hold their ground

By Stephanie N. Rotondo

Portland, Ore., Feb. 24 - Distressed debt was trading all over the map on Thursday, according to traders.

"There was lots going on and in lots of different directions," a trader said. "We did try to have a bit of a rally today, but it sort of faded at the end."

The trader also noted that it was an "absent news day," giving bonds little reason to move around much.

"It started out kind of soft," another trader said, blaming the weakness on the declining equity markets and "stuff going on overseas."

General Motors Corp. announced its fourth quarter and full-year earnings on Thursday and the bonds initially traded up on the news. But as the company's stock fell, oil prices rose and Mideast turmoil continued, the bonds ended the day a couple of points lower.

Meanwhile, market mainstays such as OPTI Canada Inc. and NewPage Corp. remained active, though with no news to speak of. OPTI's debt gyrated throughout the session, closing a bit weaker than Wednesday, while NewPage was hanging in there.

GM debt declines

General Motors' debt was "fairly active," a trader said, as the company announced its first return to profit for the year, its first since 2004.

Still, the bonds traded "much higher in the morning. They ended the day down a couple points," the trader said, as rising oil prices and Mideast turmoil concerned investors.

He said the most active note was the 8 3/8% notes due 2033, closing at 33 bid, 33½ offered, down from the day's high around 351/2.

The 7.20% notes due 2011 were also weaker, trading around 31.

"Those correlate much more to the stock at this point than the underlying [condition of the company]," he said. The stock (NYSE: GM) fell below its initial public offering price on Thursday, closing at $33.02, down $1.57, or 4.54%.

Another trader said the benchmark 8 3/8% notes finished "off a little bit" around 331/2, while another market source placed the paper at 32 bid, 33 offered, down a deuce.

For the year of 2010, the Detroit automaker posted a profit of $4.7 billion, compared with a $21 billion loss in 2009. The fourth quarter also showed a profit at 4510 million, or 31 cents per share. That compared with a loss of $3.5 billion in the same quarter of 2009.

Fourth-quarter revenue came to $36.9 billion, and $135.6 billion was reported for the full year.

The price of oil meantime fell $1.41, or 1.44%, to $96.69 a barrel. However, earlier in the session, oil hit well over $100 per barrel. The end-of-the-day reversal was being blamed on rumors that Libyan leader Moammar Gadhafi had been shot.

The U.S. is claiming no knowledge of any shooting.

OPTI gyrates, NewPage unchanged

Market mainstay OPTI Canada and NewPage continued to be active, even without any credit-specific news out.

A trader said OPTI's subordinated debt - the 7 7/8% and 8¼% notes due 2014 - "had a huge run-up," gaining about 4 points before "giving some back." He pegged the paper around the 55 mark, up from opening levels around 52 and down from the intraday high around 56.

He added that about $70 million to $80 million of the bonds changed hands.

The trader also saw the NewPage 10% notes due 2012 at 661/2, which was unchanged. About $25 million to $30 million traded, the trader said.

At another desk, OPTI's bonds were deemed "up a couple points," also around that 55 level, while NewPage's 10% notes were seen at 661/2. The 11 3/8% notes due 2014 were "unchanged to down a quarter" at 993/4.

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