ATP Oil slips again; ResCap up ahead of coupon; Central European down in converts market

By Paul Deckelman

New York, Nov. 14 - ATP Oil Gas Corp.'s bonds continued to get drilled for a third straight session on Monday, falling into the mid-60s, down another couple of points on the day and well down from levels in the mid-80s as recently as a week ago.

Along with financial reports, the company's news included the revelation that output from its wells has decreased, raising the specter that it might encounter liquidity problems, possibly even affecting its ability to make bond interest payments next year.

While ATP was sliding, another recently busy distressed name - Residential Capital LLC - was gliding.

The mortgage lender was up on Monday. The company's bonds plummeted last week on market fears that it might be headed for a bankruptcy filing, but then the bonds bounced a little off their bottom later in the week.

Traders noted that Residential Capital has a coupon payment on one of its issues due on Tuesday. Market expectations are that it will, indeed, pay it.

Bankrupt futures brokerage MF Global Holdings Ltd.'s bonds continued to sink, down another 2 points on the day, leaving them in the low 30s.

In the convertibles market, there was considerable activity in Central European Distribution Corp.'s paper, which has continued to fall in the wake of the recent release of sobering quarterly results by the alcoholic beverages distributor.

And biotech firm Savient Pharmaceuticals Inc.'s converts continued to lose ground, in tandem with its eroding share price.

ATP attrition continues

Monday was another tough session for Houston-based energy exploration and production company ATP Oil & Gas, whose 11 7/8% second-lien notes due 2015 - recently trading as high as the mid-80s - fell several more points to a 65 to 66 context from the higher 60s, where they were at the end of last week.

"So they're down a couple more [points] on the day, on good volume," a trader said, seeing them as the No. 1 junk-bond volume leader on Trace.

While the official volume figure was $28 million, he said it could actually be higher, like $35 million or $40 million. Because when Trace indicates a trade of more than $1 million, it "could be a million or could be $2 million," he said.

"When things go down, they usually don't trade in $10 million or $15 million blocks . They're usually $2 million to $3 million," he added. "But it's still really good volume."

"The big name [of the day] again was ATP," declared a second trader, who saw the bonds continuing to erode, as they've been doing pretty much each session since the release of the company's third-quarter earnings and company guidance. ATP also acknowledged that it will produce less oil and gas going forward, raising some investor qualms about the company's ability to service its debt in 2012.

Production problems are the root of the slide. "With that big coupon, trading in the 60s - that's scary," the trader said.

The bonds remain active, another trader said, seeing them down about 4 points to the 65 to 66 level.

He also noted that "their stock got hit pretty good," continuing a losing streak that began last week after the earnings news.

The Nasdaq-traded shares were down by 18% at one point, before ending the day down 97 cents, or 14.37%, to close at $5.78. Volume of 8.4 million shares was more than four times the norm.

ResCap rallies before coupon

A trader said that he saw some ResCap action, quoting the Minneapolis-based mortgage lender's 9 5/8% notes due 2015 going home at 60 bid, 61 offered, which he said was up 1 point, on "a sociable amount of trading."

All of the day's trades "took place right in that range," the trader said.

Another trader, in noting those 9 5/8s trading at higher levels, pointed out that "they've got a coupon due [Tuesday], so they rallied a little bit, in front of that coupon," back up to the 60 level.

"They got to be in the low- to mid-50s last week" on the news that ResCap had hired Centerview Partners LLC to advise a restructuring of its finances, leading some investors to fret that a bankruptcy filing was likely in the cards.

"But they kind of bounced back from those levels," the trader said.

Yet another trader noted that the 9 5/8s plunged more than 23 points, down into the mid-50s from about 80 previously on the Centerview story.

"This market has not much forgiveness," the trader said, referring to any perceived bad news.

ResCap originally sold more than $4 billion of those 9 5/8% bonds in June of 2008, but took out some $1.89 billion of the issue in an exchange offer later that year after the company and its parent, then known as GMAC LLC, ran into financial trouble during the Wall Street meltdown.

GMAC, now known as Ally Financial Inc., drastically reduced its own debt and the debt of ResCap by giving holders of existing bonds a combination of new secured bonds and cash.

That left roughly $2.12 billion of the 9 5/8s still outstanding, meaning a $110 million coupon payment is due Tuesday.

MF Global retreat rolls on

A trader said that MF Global' 6¼% notes due 2016 were down about another two points on the session, finishing at 31½ bid, 32½ offered, on "decent volume."

He said that all of the bankrupt New York-based futures and commodities brokerage company's paper had converged at about the same level since its recent Chapter 11 filing - the 9% notes due 2038 and the two convertible issues, the 1 7/8% notes due 2016 and the 3 3/8% notes due 2018.

"But, the 61/4s were the most active," the trader said.

A market source saw more than $16 million of the bonds changing hands.

While they dropped at one point to levels as low as just over 25, those were small trades and not considered representative.

The market source quoted the bonds going home at 32½ bid, down 2 points on the day.

Back in late October, that paper was still trading in the middle 60s, about twice of what it is trading at now.

But that was before the company, headed by former Goldman Sachs chairman and ex-New Jersey governor Jon Corzine, was revealed to be in big trouble because of heavy leverage and large bets placed on sovereign debt of troubled European countries like Greece.

Central European still sliding

In the convertibles market, Central European Distribution's 3% convertibles due 2013 traded down another point or more to 46½ to 46¾ on Monday from a previous level of 48.

Both prices were against a stock price of about $3.00, although the pricing of the convertible isn't tied to the stock.

Shares of the Mt. Laurel, N.J.-based alcoholic beverage company slipped another four cents, or 1.3%, to $3.01.

Central European seemed to be an exception to the general market lassitude, with the force of its move felt as a top volume name.

There didn't appear to be any market-moving news, a Connecticut-based sellsider trader said.

"Volume begot volume," the trader said.

A second sellsider said there was a large buyer in the market.

A market source at another desk said that volume in the converts topped $28 million, making it one of the busiest issues in the market.

While the final trades of the session actually printed at considerably higher levels, north of 49, the source noted that these were just small odd-lot pieces and probably not representative of true trading levels.

On a round-lot basis, the issue closed at 461/2, down 1½ points from a size trade at 48 late Thursday.

The move lower represents the continuation of a slide that began more than a week ago when the paper took a 15-point tumble after the beverage maker and distributor reported earnings that missed estimates and lowered its outlook for the second time this year.

The company has shed more than a third of its market value so far this year.

Investors were unnerved after the company, which produces vodka in Poland and distributes it in that country, Hungary, the Russian Federation and elsewhere in Eastern Europe, cut its full-year outlook for earnings to 24 cents to 45 cents a share, and reduced projected revenue to $850 million to $950 million.

That is down from previous guidance of 80 cents to $1 of profit on sales of $900 million to $1.05 billion.

The earlier guidance also represented a cut from the company's original projections.

Central European also said net income during the quarter ended Sept. 30 was $4.2 million, or 6 cents a share, down from $8.5 million, or 12 cents a share, for the previous year. The earnings missed Wall Street's estimates.

However, revenue did rise 45% year-over-year, to $228.9 million, which was up from the $220.9 million expected.

The company ended the third quarter with $111.2 million in cash, down from $122.3 million at the start of the year.

Savient slips as stock slides

Also among the convertibles, Savient Pharmaceuticals' 4¾% converts due 2018, which priced at par at the end of January, traded around 64 bid on Monday versus an underlying share price of $2.60 during the session, according to a New York-based sellside analyst.

At another desk, a market source saw those notes going home at around 63 7/16 bid, well down from better than 64¾ on Thursday, the last day the convertibles had been traded due to Friday's bond market holiday.

Shares of the East Brunswick, N.J.-based specialty biopharmaceutical company fell 16 cents, or 6%, on Monday, to end at $2.75.

The shares have lost nearly 75% of their value in the last year and were downgraded by JMP Securities last week to "market underperform" from "market perform" on expectations of lower sales of its gout drug, Krystexxa.

Rebecca Melvin contributed to this report

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