Distressed debt volume dwindles ahead of holiday week; A&P debt remains strong; NewPage steady

By Stephanie N. Rotondo

Portland, Ore., Dec. 17 - Distressed debt ended the week "unchanged, up a bit in spots," a trader said Friday.

Another trader remarked that there was "more stuff [going on] than you would have thought for a Friday."

But the first trader disagreed saying, "People don't want to do anything wrong [before the end of the year] so they aren't doing anything."

At another shop, a trader offered a different opinion as to why market players were not participating much.

"Everybody was hung over," he quipped, as several shops held their holiday parties Thursday night.

Still, it is presumed that trading volume will remain muted ahead of Christmas Eve, barring any significant market changes or credit-specific news.

Of Friday's goings-on, Great Atlantic & Pacific Tea Co. Inc.'s bonds remained on an upward course, surprising many of those who watch the name. There are several theories that attempt to explain the debt's recent gains, from short covering to a buyer who wants to play a larger role in the company's bankruptcy case.

Meanwhile, NewPage Corp. was among the day's more active credits. But traders saw the bonds staying right where they have been.

And, OPTI Canada Inc. saw its paper gaining ground, after falling steadily over the course of the last few weeks. As one trader explained it, the increases could be because more investors are paying attention to it.

A&P climbing higher

The Great Atlantic & Pacific Tea Co.'s debt continued to trade up to higher levels, though market players were not entirely sure why.

One trader pegged the 11 3/8% notes due 2015 around 96, noting that the bonds had opened around 93.

"It's crazy, but that's where they are trading," he said.

He also saw the convertible issues - the 5 1/8% notes due 2011 and the 6 ¾% notes due 2012 - were trading up as well at 34 bid, 35 offered.

Another trader said the 11 3/8% notes got as high as 95½ bid, 96¼ offered, before coming back "a little off their highs" to end around 95 bid, 95 ¾ offered.

"Those continue to move up," said another trader, placing the 11 3/8% notes around the 96 mark.

"I think people think these things are covered, that they are worth par," the trader said.

However, others have expressed shock at how high the bonds are currently trading, leaving the trader to question what was really going on.

"The question is, is it a short squeeze, or is it somebody trying to build a big position so they can influence the bankruptcy? I just don't know."

The Great Atlantic & Pacific Tea Co. is a Montvale, N.J.-based supermarket operator.

NewPage active, unchanged

NewPage bonds were active - but mostly unchanged - during the final trading day of the week.

A trader said about $20 million to $25 million of the 11 3/8% notes due 2014 turned over around 921/2. He said that level was "right kind of where it has been, but on better volume."

Another trader also deemed the debt unchanged, quoting the 11 3/8% notes at 92¼ bid, 93 and the 10% notes due 2012 at 57½ bid, 57¾ offered.

The Miamisburg, Ohio-based papermaker said in a regulatory filing Friday that one of its board members, Charles Long, had resigned. The filing did not indicate any reasons for his departure.

However, the news might have been unsettling to the market, as Long's resignation marks the sixth exit of an executive or board member in the last six months.

OPTI regains ground

After declining steadily in the last week or so, OPTI Canada bonds gained ground in Friday trading.

One trader opined that the gains were because "people are paying more attention to it and there are lots of different opinions" as to how the company will fare going forward.

He saw about $20 million of the 8¼% notes due 2014 change hands around 66. The 9% first-lien notes due 2012 meantime traded up to 99½ from 981/2.

"Those never should have gotten so low," he said of the first-lien paper, as that particular issue would be more than covered in the event of a bankruptcy.

Another trader called the bonds a point higher, the 8 ¼% notes around 66 and the 7 7/8% notes due 2014 around 661/4.

OPTI Canada is a Calgary-based oilsands producer.

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