Freeport dips as company eyes China; OSI gains, Host falls; NOVA still working with lenders; GM steady

By Stephanie N. Rotondo

Portland, Ore., Feb. 18 - Freeport-McMoRan Copper & Gold Inc.'s bonds were back to the top spot Wednesday, traders said, as the company's top dog said China was key to the company's turnaround.

Traders saw the company's bonds falling some in "pretty active" trading. The losses came after a CNBC interview with Richard Adkerson in which he said a Chinese stimulus package could help Freeport's bottom line.

Meanwhile, OSI Restaurant Partners LLC announced a Dutch auction tender offer for its 10% notes due 2015. The news gave the company's debt structure a boost. Elsewhere in the sector, Host Marriott Hospitality Corp. released quarterly results. Though the numbers were better than expected, the real estate investment trust's debt ended the day weaker by as much as 5 points.

NOVA Chemicals Corp.'s chief executive remains hopeful that a deal can be reached with its lenders - and soon. Investors might be feeling the same optimism, as NOVA's bonds were seen up as much as 3 points on the day.

A credit facility amendment, coupled with a viability plan submitted to the Treasury Department on Tuesday, did little to upset General Motors Corp.'s term loan. Traders reported that the debt closed the session unchanged to a tad weaker.

Freeport bonds dip

Freeport-McMoRan's bonds traded actively during the mid-week session, but ended lower on the day.

One trader called the 8 3/8% notes due 2017 down nearly a point at 87.75, with about $26 million to $27 million trading. He also saw the 8¼% notes due 2015 at 90, a loss of 2 points day-over-day.

Another trader called the 8¼% notes "pretty active" at 90 bid, 90.75 offered, down from around 92 in the previous session.

The declines in the bonds came as Richard Adkerson, Freeport's president and chief executive, told CNBC that the key to Freeport's recovery was China.

"They have the financial resources to do things, and that's what the government and the people want to see happen," he said in the interview. "They can do things that are positive for our business - for the commodity business - at a time when the rest of the world is facing such low consumption."

Adkerson noted that China currently is considering a stimulus package that is construction heavy, which could lead to more demand for Freeport's metals.

Phoenix-based Freeport has struggled over the last year as the demand for copper has diminished. As such, the company has cut its work force and employed a variety of cost cutting measures.

"By the end of September [2008] we realized we had to turn completely around and start cutting high-cost production, deferring capital expenditure and adjusting our business so that we could live within our cash flows," Adkerson told CNBC.

OSI gains, Host falls

OSI Restaurant Partners, which owns the Outback Steakhouse chain, announced a Dutch tender offer for its 10% notes due 2015 and the resulting reaction was positive, traders reported.

A trader quoted the bonds at 21 bid, 21.25 offered, up from around 16 last week.

Another trader pegged the notes at 20.5 bid, 22 offered, noting that he saw them earlier in the day at 18 bid.

Yet another source placed the issue at 20.5 bid, 21.5 offered.

The company's term loan was also better, according to a trader. The term loan was quoted at 47 bid, 49 offered, up from Tuesday's levels of 46 bid, 48 offered, the trader said.

The Tampa, Fla.-based restaurant chain said in a regulatory filing that it would tender for some of its outstanding notes. The offer is a move to improve its covenant situation. As of Sept. 30, the company had about $1.8 billion in debt.

OSI will purchase notes for $73 million, excluding accrued interest. There is currently $488.2 million aggregate principal amount of the notes outstanding.

The tender is being done as a modified Dutch auction with an acceptable bid price range of $225 to $275 per $1,0000 principal amount of the notes.

OSI said upon disclosing its tender offer plans that it is doing the transaction to improve its financial covenant position under its senior credit facility.

The other purpose of the tender is to reduce debt, the company explained in a news release.

Funding for the tender is coming from cash on hand and an equity contribution of at least $47 million from parent company, OSI HoldCo Inc.

The offer will expire at 12 a.m. ET on March 18.

Also included in the filing were preliminary fourth-quarter results. Revenues were lighter at $928 million from $1.03 billion the year before. That figure represented a 9.5% decline in sales at its Outback chain and a 20% decline at its Fleming's Prime Steakhouse and Wine Bar restaurants.

Elsewhere in the restaurant and hospitality sector, Host Marriott posted its quarterly report and predicted weaker results to come. As a result, traders said the bonds were down as much as 5 points.

A trader deemed the 7 1/8% notes due 2013 unchanged at 79 3/8, while its 6¾% notes due 2016 dropped 5 points to 72.

Another trader called the name "a little active" and 4 to 5 points weaker overall. He quoted the 7% notes due 2012 at 83.5 bid, 84.25 offered, versus levels around 88 on Tuesday.

The real estate investment trust company saw its funds from operations - a key strength indicator in the field - drop 29% to 53 cents per share. However, that was well over analyst estimates of 47 cents per share.

Revenue per available room, also known as revpar and an indicator of hotel performance, decreased 9.4% for the quarter.

Still, the company said it expected operating profit margins to decline more in coming quarters.

NOVA CEO: still working

NOVA Chemicals' debt gyrated widely throughout Wednesday trading, following word from the company's top executive that he still expected to reach a deal with its lenders.

A trader saw the 7.4% notes maturing on April 1 gaining nearly 3 points to close around 60. Another market source pegged the issue at 62 bid, 63 offered. However, the source noted that the debt hit a low of around 58 and got as good as 65 before settling back in.

In a web cast at an industry conference, Jeff Lipton, NOVA's chief executive officer, said the company hoped to have resolved its financing situation soon.

"We remain confident in our ability to work with both existing and new lenders, and hope to be able to provide an update on our financing situation soon," Lipton said.

NOVA has to raise $100 million by the end of the month to appease its lenders and an additional $100 million by June. Recent reports that the Alberta government, along with two of its financial institutions, was planning on helping the company raise the funds proved to be false.

GM loan little affected

General Motors' term loan was unchanged to a little bit weaker, depending on which trader was asked, as the company announced a credit facility amendment and its updated plan that was presented to the U.S. Department of the Treasury.

One trader had the term loan quoted at 35½ bid, 36½ offered, down from 35¾ bid, 37¼ offered, while a second trader was quoting it wider at 35 bid, 38 offered, in line with previous levels.

On Wednesday, General Motors said that it amended its credit facility to, among other things, permit the granting of junior liens to secure the loan from the U.S. Department of the Treasury.

In addition, the amendment provides for a minimum Libor rate and an increase in the interest and default rates, all consistent with the terms of the Treasury loan.

In more General Motors news, late Tuesday, the company came out with the updated plan that it gave to the government, and in this plan, the company is now asking for $22.5 billion in federal funding support.

Previously, the company was looking for $18 billion in funding and assumed that its $4.5 billion U.S. secured revolver would be renewed when it matures in 2011. However, now, the thought is that the revolver may not be able to be rolled over at maturity, so the extra federal funds are being sought after.

The plan also discussed the issue of bankruptcy as a potential option for restructuring, with the conclusion being that it would be a highly risky, extremely costly and time-consuming process.

General Motors is a Detroit-based automotive company.

Sirius slips again

Sirius XM Radio Inc.'s bonds fell back to levels seen on Friday, a trader said, after running up in Tuesday's session on news of a $530 million financing deal with Liberty Media Corp.

The trader quoted the Sirius 9 5/8% notes due 2013 at 46.5 bid, 47 offered, down from around 50 on Tuesday. He also saw the 13% notes due 2013 linked to XM quoted wide at 49 bid, 53 offered.

Another source deemed the XM bonds more than 2 points weaker at 57.75 bid.

But Liberty's bonds, along with those of its DirecTV Group Inc. subsidiary, regained the losses incurred on Tuesday. Liberty's 5.7% notes due 2013 gained 5 points to close at 81.5 bid, while DirecTV's 6 3/8% notes due 2015 inched up half a point to 93 bid.

However, EchoStar DBS Corp.'s 6 3/8% notes due 2011 dropped almost a point to 95.75 bid. EchoStar had previously made an unsolicited bid for the satellite radio provider, which was later rejected. Liberty's recent investment in Sirius XM is seen by some as a way to avoid a takeover by EchoStar's Charles Ergen, who has been buying up pieces of Sirius' debt of late.

Sara Rosenberg contributed to this article.

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