Energy sector takes a hit in wake of Japan nuclear shock; OPTI trades active again, but weaker

By Stephanie N. Rotondo

Portland, Ore., March 15 - Distressed debt opened Tuesday's session "quoted much lower," a trader said, but most credits managed to recoup at least some of those points.

"The market was lower; volume still wasn't that high," the trader said.

"In general, things were down 1 to 2 points, but it felt like a few things were rebounding at the end of the day," said a second trader.

Another trader, however, noted that total secondary trading volumes were about double that of Monday. He also said that bids were getting hit early in the session, when prices were much lower.

Still, a comeback of about 100 points in the stock market helped to bring stability, according to the trader.

"In markets like this, it's the ones you can trade that end up trading," he said. "And then you figure out what the direction is."

The rally in the equities helped to "take some of the fear out.

"I think there is a recognition that on a personal and humanitarian level [the impact of Japan's 8.9 magnitude earthquake on Friday] this is as horrific as it gets. But if you are a cold-hearted money-manager, it isn't as terrible."

The trader pointed out that, from a purely financial viewpoint, there could be "real economic gain" in the aftermath of the quake, especially once Japan begins the process of rebuilding.

Of the day's goings on, power producers like Energy Future Holdings Corp. and Edison International Inc. were among the busier credits. Bonds in that space were typically lower, but up from their intra-day lows, following the overall market trend.

Trading in OPTI Canada Inc. paper also "really kicked back in." Though also ending on the softer side, the debt was still "ending near the highs."

Market mainstays like NewPage Corp. and Caesars Entertainment Corp. were also active, with Caesars leading the pack.

Energy sector gets hit

Power producers were trading actively in the wake of Japan's recent earthquake and ensuing nuclear disasters, according to traders.

Across the space, bonds were ending lower, but up from the intraday lows.

Energy Future, a.k.a. TXU, for example, saw its 10% notes due 2020 trading "very active," according to one trader. He said "$50-odd million" of the notes changed hands, hitting a low of 102 and a high of 1031/4.

Like the rest of the market, the bonds were finishing up the day near the highs.

Another trader, however, called TXU's 10% notes unchanged around 1031/4. The trader also saw the 11¼% notes due 2017 slipping half a point to 75½ and the 10¼% notes ending around 49.

The second trader also saw Edison International's 7½% notes due 2013 falling half a point to 97 and the 7% notes due 2017 dipping a point to 74.

And, he said Dynegy Inc.'s 8 3/8% notes due 2016 dropped a point to 781/4.

OPTI active again, lower

A trader said trading in OPTI Canada's subordinated notes "really kicked back in," with $25 million to $30 million of the 7 7/8% notes due 2014 turning over.

He said the notes hit a low of 49½ and a high of 521/4, closing near the highs.

Another trader pegged the paper at 501/4, down 2½ points on the day.

There was no news out on the Calgary, Alta.-based oilsands producer. The price of oil, however, did fall during Tuesday trading to $97.39 a barrel.

NewPage loses foothold

NewPage's 10% notes due 2012 remained an active credit. But after holding its ground around the 66 level in recent sessions, traders saw the bonds falling a couple points with the market.

One trader said about $10 million to $12 million of the notes traded at 643/4. Another trader saw the bonds at 65, down 1¼ points.

NewPage is a Miamisburg, Ohio-based coated papermaker.

Caesars still weak

Caesars Entertainment - or Harrah's, as most market players still refer to it - continued to lose ground in trading, sources said.

The bonds were also weaker on Monday and the declines have been linked to the general negative tone of the market.

A trader said the 10% notes due 2018 were "by far the most active issue" of all distressed bonds, with "$80 million to $100-odd million" of the debt trading. He saw the notes moving in a "pretty good trading range" of 87¼ to 89.

Another trader called the paper a point weaker at 88.

Caesars is a Las Vegas-based casino operator.

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