Sino-Forest bonds weaken further; OPTI, Clear Channel lose ground; Greek bank preferreds fall

By Stephanie N. Rotondo

Portland, Ore., June 7 - The distressed debt market was a bit more active during Tuesday trading, as "almost everything in the world that you can think of traded," a trader said.

He said that total secondary volume came to about $1.7 billion, calling the session "much, much busier" than it has been over the last two weeks.

Sino-Forest Corp. took up a good chunk of trading, as investors attempt to get a handle on what is going on with the company. A trader said it was difficult to get a clear picture of what was going on and whether or not the fraud allegations by Muddy Waters research were true or not.

"In the best of times, there is very little transparency, so there is even less now," he said.

Away from the tree-farmer, both OPTI Canada Inc. and Clear Channel Communications Inc. bonds declined, though on no news.

In the preferred realm, National Bank of Greece SA's preferred stock remained soft as Moody's Investors Service said any rollover of the sovereign debt would likely constitute a credit event.

Sino-Forest remains weak

A trader said "tons" of Sino-Forest debt traded during Tuesday's session, "probably $40-odd million of the two issues."

He called the 6¼% notes due 2017 down 5 points around 55 and the 10¼% notes due 2014 down 6 points around 60.

Another trader saw the 6 ¼% notes falling to the mid-50s from the low- to mid-60s previously.

"That was hit pretty good," he said. "Those continue to be active."

After losing major ground on Thursday and Friday, the Hong Kong and Ontario-based forest products company attempted to recoup its losses by releasing documents on its Chinese assets, as well as information on its cash balances.

Last week, a research report put out by Muddy Waters Research in Hong Kong - operated by known short-seller Carson Block - said the company overstated its holdings in China and that its wonky financial reporting was tantamount to fraud. Sino-Forest denied Block's claims on Friday, but also indicated that it was going to fully investigate the matter.

Paulson & Co., an investor of Sino-Forest, is also reportedly investigating the claims.

On Tuesday, Sino-Forest continued to make headlines, as Moody's Investors Service said it could cut the company's rating and a Dundee Securities Ltd. analyst was reportedly saying that Muddy Waters had pre-marketed its controversial report to various hedge funds for the last five weeks.

Muddy Waters also said it would publish more of its research in the near term.

OPTI debt declines

OPTI Canada's subordinated paper - the 7 7/8% and 8¼% notes due 2014 - "got cheaper," according to a trader.

He pegged the 7 7/8% notes around 451/2, down half a point.

Another trader quoted the notes at 45 bid, 45½ offered, calling that a half- to a full-point weaker.

OPTI is a Calgary, Alta.-based oilsands producer.

Clear Channel ends heavy

There was no news out on Clear Channel Communications that would have caused heavy trading in the San Antonio-based multimedia company's debt, and yet it traded actively anyway, a trader said.

He said about $20 million to $30 million of the 11% notes due 2016 changed hands at 91½ bid, 92 offered.

He said that was "down a little bit, but not a lot."

Another trader also saw the 11% notes slipping to 91½ bid, 92 offered. He called the 9% notes due 2021 "down some" at 98 bid, 99 offered.

"I thought those things were closer to 99 [bid], 99½ [offered]," he said.

Greek bank slides again

National Bank of Greece's series A Preferred (NYSE: NBGPA) continued to decline in Tuesday trading, as Moody's said a sovereign debt rollover would, in fact, be considered a credit event.

The shares lost $1.10, or 8.98%, to close at $11.15.

The preferreds had fallen in the previous session as well, erasing gains seen in Friday trading. Monday's dip came on the back of a Wall Street Journal article that indicated banks were being "encouraged" to allow the country to skip payments on preferreds and debt.

"It's certainly nothing official," a source said. "It's hard to say exactly what that means but it's probably not good."

On Sunday, European Central Bank Governing Council member Nout Wellink said that banks are being asked to roll over their Greek debt at maturity, according to a Reuters report.

"We are trying, in what is called in official terms the Vienna initiative, to persuade banks to stay in those countries after 2012 and when debt matures to keep active in those countries," Wellink said. "I think the governments of Europe temporarily need to make available some additional refinancing money."

France has already said they approve of such a plan.

"France is favorable to a solution which would involve the private sector in ways that wouldn't endanger the banking sector or the funding of the Greek economy," said an official in the Journal on Monday.

Part of the draw of the debt rollover was that such an action would be considered voluntary. On Tuesday, however, Moody's analyst Bart Oosterveld, head of the sovereign risk group, said a rollover in this particular situation could not truly be voluntary, and this it would be classified as a credit event.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.