OPTI Canada bonds post gains on CNOOC bid; Kodak looks for patent options, bonds hang in there

By Stephanie N. Rotondo

Portland, Ore., July 20 - Distressed debt held its ground Wednesday and "a lot of stuff was mostly unchanged," a trader reported.

There was, however, big news that caused OPTI Canada Inc. bonds to gain as much as 12 points on the day. The bonds jumped in heavy trading after CNOOC Ltd. made a bid for the troubled oilsands producer.

Meanwhile, Eastman Kodak Co. said it was looking into "strategic alternatives" in regard to its digital imaging patent portfolio. But the bonds were little fazed, closing steady to just slightly higher.

OPTI jumps on CNOOC bid

OPTI Canada's subordinated issued popped 10 to 12 points, according to traders, on news China's largest offshore-oil producer - CNOOC Ltd. - had made an offer to buy the oilsands producer.

"All of those were up," a trader said. "There was tons of trading."

He said there was "heavy buying" in the 7 7/8% and 8¼% notes due 2014. Both issues closed around 65, which he said was up 10 to 12 points.

At another desk, the notes were quoted at 64½ bid, 65¼ offered, up 11 to 12 points, depending on the issue.

Yet another trader saw "a gazillion" dollars worth of Opti Canada bonds trading, noting that the bonds had recently been on the rise from their lows in the 40s less than a month ago.

"God help people who were short - very painful," he said.

He said that with little else going on in the distressed - debt precincts, "OPTI kept a lot of people very busy today, as it whooshed up."

Another trader called it "the hot name of the day," and pegged the 8¼% notes at 65 bid, up 11 points, with over $165 million of the bonds traded, and saw its 7 7/8% notes up 12 points on the day at that same 65 level, with $67 million traded.

CNOOC's bid for bankrupt OPTI was valued at about $2.1 billion and came exactly a week after OPTI filed for creditor protections in Canada.

Under the terms of the deal, CNOOC would pay about $34 million for all of OPTI's outstanding common stock and would take on over $2 billion in debt.

"We are very pleased with this transaction and believe it is in OPTI's best interest," said Chris Slubicki, president and chief executive of OPTI, in a statement. "CNOOC Ltd. is a technically experienced and well-capitalized company that is equipped to support further development at Long Lake and future expansions in the Canadian oil sands."

"The transaction strengthens our Canadian presence in the oil sands business," added Yang Hua, chief executive of CNOOC. "We believe that upside potential of the assets will facilitate local energy supply and our production growth in the long term."

OPTI's board of directors has already unanimously approved the sale.

OPTI Canada is based in Calgary, Alta.

Kodak steady on patent news

Eastman Kodak paper was unchanged to a tad firmer as the company said it was "exploring strategic alternatives related to its digital imaging patent portfolios, a move reflecting the current heightened market demand for intellectual property."

The 7¾% notes due 2013 inched up half a point to 83½ bid, one market source said. Another saw the 9¾% notes due 2018 steady at 851/2.

The patent portfolio in play includes more than 1,100 patents, about 10% of Kodak's total portfolio. The Rochester, N.Y.-based company said it hired Lazard LLC to assist in the process.

"Given recent trends in the marketplace for intellectual property, we believe the time is right to explore smart, opportunistic alternatives for our digital imaging patent portfolios," said Laura G. Quatela, general counsel, in a press release.

"This effort reaffirms our commitment to the three pillars of our intellectual property strategy - design freedom, access to new markets and partnerships, and cash generation."

Kodak also noted that it will "continue to pursue its successful patent licensing program as well as all litigation related to its digital imaging technology."

Dynegy ticks up

A trader saw Dynegy Inc.'s bonds "tick up at the end of the day" and end up about 2 points on the session, bringing to a halt the headlong slide seen recently in the Houston-based power generating company's paper following its announcement of plans for a new $1.7 billion credit facility, which would be senior to the bonds.

He saw its 7½% notes due 2015 at 76 bid, 77 offered, while its widely watched 7¾% notes due 2019 were "up a couple of points" in a 70-71 context.

"That's a real move for them," he opined.

Paul Deckelman contributed to this article

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