ATP Oil & Gas off after disappointing earnings; ResCap rises as bankruptcy nears; PDVSA busy

By Paul Deckelman

New York, May 10 - ATP Oil & Gas Corp.'s junk bonds fell sharply on Thursday in line with a slide in its shares after the offshore energy exploration and production company reported less-than-stellar quarterly earnings that even company executives admitted were disappointing.

In that same energy sphere, Venezuela's state-run Petroleos de Venezuela SA's bonds were among the busiest of the day. However, traders said that the bonds didn't really go anywhere on Thursday after having retreated on Wednesday.

Elsewhere, James River Coal Co.'s 2018 convertibles gained a point to 35.25 after the Richmond, Va.-based coal producer posted a narrower-than-expected quarterly loss given a rise in metallurgical coal shipments and cost cutting.

Away from the energy sphere, Residential Capital LLC's bonds were being quoted several points higher, helped by news reports that corporate parent Ally Financial Inc. got a verbal commitment from some of ResCap's bondholders to support a planned bankruptcy filing by the money-losing residential mortgage lender.

ResCap also reportedly has lined up debtor-in-possession financing in preparation for such a filing.

ATP trades off

A trader declared that ATP Oil & Gas' 11 7/8% senior secured second-lien notes due 2015 were "the winner of the day," at least in terms of volume activity, though definitely not in terms of price.

"I saw that name all day long," he said. "A boatload traded."

He estimated volume in the Houston-based offshore energy exploration and production company's paper of at least $55 million, adding "who knows?" and speculating that "if $55 million was showing [on Trace], there's a lot more than that" since Trace tends to undercount the size of high-yield deals over $1 million.

He saw the bonds end at 69½ bid, 70 offered, calling that down about 5 points from Wednesday's levels.

A second trader said that ATP, which released its first-quarter results after the financial markets closed on Wednesday followed by a Thursday conference call, "was active" as a result and that virtually all of the activity took place on the downside, with levels below 70.

"They're a habitual disappointer," he declared, "and they always have a lot of reasons for it, but they always do" disappoint the marketplace.

In the quarter ended March 31, the company recorded a net loss attributable to common shareholders of $145.1 million, or $2.83 per basic and diluted share - wider than the $119.5 million, or $2.34 per basic and diluted share, of red ink seen a year ago in the 2011 first quarter.

Revenue of $146.6 million fell $32 million short of Wall Street expectations. Even the company's chairman and chief executive officer, T. Paul Buhlman, opened his conference call presentation by stating that the company was not pleased with those first-quarter results.

The trader noted that the bonds had been trading in a 74-75 context recently but fell to 71-72 on Thursday "and dropped below 70 for a while."

"That's one that swings around with the stock and is very volatile on announcements from the company," he said. ATP's Nasdaq-traded shares tumbled by 70 cents, or 9.78%, on Thursday to end at $6.46, although volume of 2.2 million shares was about the norm.

"It looks like they had a miss, with a bunch of explanations, and you've had a lot of volatility in the stock and the bond."

Yet another trader said that the bonds had opened at 72½ bid, 72¾ offered on Thursday but swooned down to 69½ and stayed there as market players got a chance to digest the less-than-overwhelming news in the quarterly earnings announcement and conference call.

"I guess they didn't like the earnings," he said.

He saw no trading in the credit on Wednesday but said that the bonds had traded in a 74-to-74¼ bid context before that, "so they're down 5 points since then."

PDVSA is popular

Also in the energy sphere, a trader said that bonds of Venezuela's state-run oil monopoly, Petroleos de Venezuela, "were still popular" on Thursday after having been actively traded on Wednesday at levels down around a point or so from where they had been earlier.

"They have at least three of the top 10 volume issues," he said.

He saw PDVSA's 8½% notes due 2017 finishing around 86½ bid, 87 offered, which he said was "about where they were" earlier and on "good volume" of about $45 million.

He said that 9% notes due 2021 were also little changed on the day in a 791/2-to-80 context with over $40 million changing hands.

The company's 5¼% notes due 2017 were finishing around 75 bid, with around $12 million of the bonds trading Thursday.

ResCap rallies

Away from energy names, a trader saw Residential Capital's bonds up by several points on Thursday, quoting its 9 5/8% secured notes due 2015 having moved up to 98¼ bid on "a couple of million" traded.

He called that a two-point gain for the Minneapolis-based residential lender's paper, although he reiterated that there was "not a huge amount trading."

On Wednesday, "they were trading around 95-96, and today, they're trading around 97-98."

He cited the news reports indicating that some of the bondholders were backing the potential bankruptcy plan, "so that seems to have a positive spin on it."

The company's 8½% unsecured notes due 2013 were likewise seen up a deuce on the day at around the 33 mark and at one point were being quoted up as much as 4 points on the session at 35 bid.

A Bloomberg news report, citing unidentified sources close to the talks going on between ResCap, its corporate parent Ally Financial and various bondholders, said that key bondholders had given the company an oral commitment to support bankruptcy reorganization, with a filing possible as early as Sunday evening in New York.

The story did note that some ResCap bondholders - notably John Paulson's Paulson & Co. and David Tepper's Appaloosa Management LP, collectively holding about $800 million of paper - retained legal counsel back in January in an effort to oppose any bankruptcy.

ResCap meantime has also reportedly lined up $1.45 billion of debtor-in-possession financing from Barclays plc for use should there be a bankruptcy filing.

The U.S. government, which owns 74% of Detroit-based Ally, the automotive and residential lender and online banking company formerly known as GMAC, has indicated that it would approve such a bankruptcy filing.

A trader saw Ally Financial's busiest issue, its 8% notes due 2020, having moved up to 118¾ bid, 119 offered, which he called "up a little" from prior levels around 118¼ bid, "nothing dramatic." About $8 million of those bonds changed hands on Thursday.

James River convertibles up

In the convertible debt market, James River Coal's 3.125% convertibles due 2018 traded at 35¼ on Thursday, which was up about a point on the day, a Connecticut-based trader said.

The James River 4.5% convertibles due 2015 saw only one small trade at 451/4.

James River shares spent part of the day in positive territory but ended lower by 13 cents, or 3%, at $4.06.

The Richmond, Va.-based coal producer reported a first-quarter net loss of $15.7 million, or 45 cents a share, worsening from a loss of $7.6 million, or 28 cents a share, in the year-earlier quarter. But the latest-quarter loss was still much smaller than the 65 cent loss per share that analysts were expecting.

Coal sales rose in the quarter to $279.8 million, and analysts had been expecting the company to post sales of $277.5 million.

James River said it is withdrawing its 2012 capital expenditure forecast of $125 million due to the volatile coal market. Demand for metallurgical coal had shot up in early 2011 on strong demand from steelmakers and supply shortages due to floods in Australia, the top coal producer.

Travelport closes loan

In the bank-debt market, Travelport Ltd. completed the refinancing of its non-extended term loan due in 2013 and extended the maturity of about $61 million of its revolver to May 2015, according to a news release.

For the term loan refinancing, the Atlanta-based provider of transaction processing services to the travel industry got a new $175 million 11/2-lien term loan (Caa1/CCC) due Nov. 22, 2015 priced at Libor plus 950 bps with a 1.5% Libor floor and sold at an original issue discount of 97. There is hard call protection of 103 in year one, 102 in year two and 101 in year three.

During syndication, the coupon was reduced from Libor plus 1,100 bps and the discount tightened from 96.

Credit Suisse Securities (USA) LLC and UBS Securities LLC led the deal.

Rebecca Melvin and Sara Rosenberg contributed to this report

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