ATP Oil & Gas paper rises in answer to bankruptcy filing; PDVSA has weak tone; NII ends higher

By Stephanie N. Rotondo

Phoenix, Aug. 20 - ATP Oil & Gas Corp. was the "bond of the day," a distressed debt trader said Monday.

The name was deemed the most active of the day, not surprisingly after the struggling Houston-based offshore oil exploration company finally filed for bankruptcy late Friday.

Also in the oil arena, Petroleos de Venezuela SA was on the decline, despite a new sales agreement with India's Reliance Industries Ltd.

Meanwhile, NII Holdings Inc. was unchanged to higher, though there was no fresh news to act as catalyst.

ATP rises post-filing

ATP Oil & Gas filed for bankruptcy late Friday, bringing an end to the "if/when" chatter.

The news pushed the company's debt higher come Monday.

One trader said at least $60 million of the 11 7/8% notes due 2015 changed hands, calling the debt "up a couple points" at 311/2.

The paper has been trading flat, or without accrued interest, for the last week.

Another trader said the notes popped to 31½ bid, 32 offered from previous levels in the high-20s.

A third trader said the "very active" bonds hit a high of 33½ before settling back in around 32. He called that up 3 points from Friday's filing.

While the news appeared to have a positive effect on the debt, the stock was not as lucky. At one point, the equity (Nasdaq: ATPG) dropped as much as 56%. By the end of the day, the shares had recouped a bit of ground, closing down just under 16 cents, or 34.68%, to 30 cents.

Volume in the equity was about six times more than average.

ATP Oil finally filed for Chapter 11 protections Friday, something investors had been waiting for since Aug. 10 when news outlets reported that the company was lining up debtor-in-possession financing.

The filing came ahead of an $89 million interest payment due in November. Prior to the filing, it was widely believed that the company would not be able to make the payment, as it struggled to bring production up to targets.

The company blamed its financial troubles on its inability to hit said targets, which was made worse by the April 20, 2010 Deepwater Horizon oil rig explosion in the Gulf of Mexico. A resulting moratorium on offshore drilling in the Gulf made it difficult for ATP to reach its goals.

On its new $617.6 million DIP - provided by Credit Suisse Securities (USA) LLC - ATP is offering lenders a 200 bps consent fee for the aggregate principal amount of first-lien term loan debt rolled up into the maximum $367.6 million tranche under its debtor-in-possession financing facility, according to a market source.

The roll-up right is available only to lenders participating in $250 million new money tranche that is being offered at an original issue discount of 98, the source said.

The entire 18-month DIP facility is priced at Libor plus 850 bps with a 1.5% Libor floor.

There is no bank meeting being held to launch the transaction to investors, the source added.

Proceeds will be used to fund ongoing operations while it works on its Chapter 11 reorganization process.

PDVSA largely weaker

PDVSA was also weakening during the Monday session, despite word of a news sales agreement with Reliance Industries.

A trader saw about $23 million of the 8½% notes due 2017 falling half a point to 87, while another $16 million of the 9% notes due 2021 dropped 2 3/8 points to 801/2.

Another trader saw the 9% notes trading in an 80-81 context, which he called perhaps down a half-point, with $33 million to $35 million of the paper traded.

He saw the Caracas-based energy concern's 8½% notes also down a half-point, at 86½ bid, 87½ offered, on volume of about $23 million.

PDVSA's 9¾% bonds due 2035 were up a half-point on the day at 79 bid, 80 offered, on volume of $7 million, while its 5 3/8% notes due 2027 were unchanged at 61 bid, 62 offered, on volume of $5 million.

Venezuelan newspaper El universal reported Monday that the state-owned oil company had inked a deal with India's Reliance Industries, in which PDVSA would sell as much as 400,000 barrels per day to the company.

Meanwhile, new political polls show that current president Hugo Chavez was seeing his lead over opponent Henrique Capriles Radonski narrow. It is believed that state assets could see improvement in the event of a regime change.

Chavez has ruled over the country for 13 years. If he should win, he will continue to lead the nation through 2019.

NII Holdings ends positive

Reston, Va.-based NII Holdings' debt was either up or unchanged, depending upon whom you talked to.

One trader said the 7 5/8% notes due 2021 gained "almost 2 points" to 77 1/8, while another claimed the bonds were steady around 77.

The Latin America-focused wireless telecommunications company has been gyrating of late, on chatter that Mexico is considering selling spectrum. However, there has been no definitive word on those developments.

Investors might also be wondering if the company will be able to compete for the spectrum, given cash-flow issues.

Revel loan gyrates

Revel Entertainment Group LLC's term loan B bounced around as the company announced that it is in talks on an amendment to facilitate the upsizing of its revolver, and that based on conversations with lenders, $70 million of new revolver commitments are expected to be obtained, according to a trader.

With the news, the B loan was quoted at 74½ bid, 75½ offered, up from morning lows of 73½ bid, 74½ offered, but unchanged from Friday's levels of 74½ bid, 75½ offered, the trader remarked.

The revolver is currently sized at $50 million, but only $30 million of that amount is committed. The company is looking to increase the size and amount of commitments for the revolver to $100 million in order to cushion its liquidity.

Pricing on the revolver is expected at Libor plus 750 bps, the company said in a release.

Revel's term loan B has seen a lot of movement since the release of disappointing revenue results for the month of July a little over a week ago. In fact, over the course of last week, the loan fell a little bit more every day, losing in total about five to six points from levels of 79 bid, 81 offered on Aug. 10 - the day that the revenue numbers came out.

Total revenue for July was $17.54 million, and at that point, year-to-date revenue was $60 million.

In addition, on Friday, Standard & Poor's lowered Revel's corporate credit rating to CCC from B- with a negative outlook, and term loan to CCC from B, due to revenues being below expectations.

The downgrades reflected the rating agency's belief that the company will be "challenged to service its current capital structure" based on performance expectations and be unable to meet financial covenants in the credit agreement when they kick in during the June 2013 quarter.

Revel, a gaming and entertainment company in Atlantic City, N.J., commenced operations on March 28 and opened to the public on April 2.

Broad market holds in

In the rest of the distressed space, a trader said Eastman Kodak Co.'s bonds were on the quiet side, placing the 9¾% second-lien notes due 2018 at 69 bid, 70 offered and the 7¼% notes due 2013 at 15 bid, 16 offered.

Another trader quoted the 7¼% notes at 15 bid, 15½ offered.

The second trader also said that there was not real reaction in AMR Corp.'s benchmark 6¼% convertible notes due 2014 on news that its flight attendants union had agreed to a new contract.

He said the paper remained around 61.

NewPage Corp.'s 11 3/8% first-lien notes due 2014 meantime continued to creep higher, a trader reported. He pegged the issue at 67½ bid, 68 offered.

At another desk, a trader called Clear Channel Communications Inc.'s 10¾% notes due 2016 were about unchanged at 63 bid, 63½ offered, on volume of only about $7 million or $8 million.

Paul Deckelman and Sara Rosenberg contributed to this article

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