OPTI bonds steady after previous day's pop; Nortel paper ends mixed; Clear Channel notes gain

By Stephanie N. Rotondo

Portland, Ore., July 21 - Distressed debt remained firm Thursday, according to traders.

"Things were better," said a trader.

"The market was stronger," remarked another.

OPTI Canada Inc. held in at its recent highs. The bonds had gained as much as 12 points in the previous session on news that company was selling itself to a Chinese offshore oil company.

But not everyone is pleased with the news.

Meanwhile, Nortel Networks Corp.'s bonds ended mixed on the day, though traders were not sure what caused one issue to drop 3 points.

Clear Channel Communications Inc. bonds traded into higher territory Thursday, but it was not clear why.

OPTI bonds steady

OPTI Canada's subordinated debt was holding in at its recent levels around 65 after popping 10 to 12 points in the previous session on news that CNOOC Ltd. had made a $2.1 billion offer for the bankrupt oilsands producer.

"They weren't too much different," a trader said of the 7 7/8% and 8¼% notes due 2014, which he pegged at 64 bid, 65 offered.

The Calgary, Alta.-based company has already approved the sale, which includes the purchase of all the outstanding equity for $34 million and the assumption of over $2 billion in debt.

OPTI, which filed for creditor protections in Canada just last week, said the deal was in the company's "best interest."

The purchase of the stock works out to about 12 cents per share for the equity. Some market players are somewhat relieved that shareholders received anything, but some shareholders were not as pleased.

In the comment section of a blog on The Globe and Mail's website, user BDouglasF decried the sale.

"OPTI shareholders like myself are getting shafted," he wrote. "OPTI announces they are filing for bankruptcy and the next day they report that production is going up while at the same time production costs are going down. This would have increased the stock price. With oil prices remaining high and no doubt going higher, the debt could have continued to be served for some time to come.

"Were management feathering their nests? Stock market regulaters [sic] need to investigate the fishy goings on around the bankruptcy, restructuring and takeover of OPTI. The Chinese are getting millions of barrels of proven reserves for about $30 a barrel as well as the ever improving SAGD and upgrading technology."

Nortel ends mixed

A trader said Nortel Networks' 10 1/8% notes due 2013 and 10¾% notes due 2016 were a "smidge better," but were "probably topping out" around 113½ bid, 114 offered.

However, he said the 6 7/8% notes due 2023 was the company's "one outlier," as the debt lost 3 points to close around 73.

Another trader also deemed the 6 7/8% notes 3 points weaker around the 73 level, while "the other ones look up about a point" around 114.

Earlier in the week, the Canadian government said it would not review the recent $4.5 billion sale of the company's patent portfolio to a consortium led by Apple Inc. and including Microsoft Corp. There have been few details regarding how the group will divvy up the portfolio, but it was announced Thursday just how much Apple paid for its participation.

According to the company's earnings, which came out Wednesday, Apple footed over half of the bill, paying $2.6 billion.

Nortel is a Toronto-based telecommunications equipment manufacturer.

Clear Channel stronger

Clear Channel Communications' bonds were "a good bit better," according to a trader, though there was no news out to act as a catalyst.

He said the 10¾% notes due 2016 were up 1 to 1½ points to 90½ bid, 91 offered.

Another trader said the 10¾% notes, as well as the 11% notes due 2016, were up "almost 2 points" at 91 and 881/2, respectively.

Clear Channel is a San Antonio-based multimedia company.

Genworth hybrids fall

A trader said Genworth Financial Inc.'s 6.15% hybrid notes due 2066 were among the day's most actively traded junk issue, as the paper lost 3 points to close around 62.

The losses came as the Richmond, Va.-based insurance holding company reported preliminary second-quarter results.

The numbers were published late Wednesday.

For the quarter, Genworth said it was expecting a loss of $92 million to $112 million, due in part to the company's efforts to boost its capital reserves by $300 million.

In the second quarter of 2010, Genworth reported a net income of $42 million, or 8 cents per diluted common share.

At the end of the quarter, the company had $667 million of cash and highly liquid securities, after retiring $548 million of debt - including preferred stock - that matured during the quarter.

YRC loan breaks

YRC Worldwide Inc.'s $225 million second-out term loan due Sept. 30, 2014 broke for trading, with levels quoted at 99½ bid, par ½ offered, according to a trader.

Pricing on the loan is Libor plus 975 bps with a 1.5% Libor floor, and it was sold at an original issue discount of 981/2. The tranche is non-callable for one year, then at 101 in year two.

J.P. Morgan Securities LLC is the lead bank on the deal.

Proceeds will be used to repay outstanding debt under an existing asset-backed securitization facility and for general corporate purposes.

YRC is also getting a $175 million senior secured first-out term facility for the refinancing, for which commitments have come from JPMorgan, the Catalyst Capital Group Inc., Cyrus Capital Partners LP and Owl Creek Investments I LLC.

The first-out loan, which is due Sept. 30, 2014, is non-callable for one year, then callable at 101 in year two. Only $30 million may be borrowed at closing.

Pricing on the first-out loan is Libor plus 700 bps with a 1.5% Libor floor and a 700 bps unused fee, according to a filing with the Securities and Exchange Commission.

YRC is an Overland Park, Kan.-based transportation service provider.

Broad market holds ground

Among other distressed issues, NewPage Corp.'s 10% notes due 2012 "seemed unchanged, but kind of active" around 211/2, according to a trader.

He also saw Dynegy Inc.'s 7.67% notes due 2016 moving up nearly 2 points to 751/2, while the 8 3/8% notes due 2016 were steady at 743/4.

Another trader said Nebraska Book Co. Inc.'s 10% notes due 2011 were "still" trading at 99½ bid, par offered.

In the world of preferreds, National Bank of Greece SA's 9% series A preferreds (NYSE: NBGPA) gained 41 cents, or 5.10%, to $8.45. The gains came as European leaders agreed to a plan that would ease Greece's debt burden.

Sara Rosenberg contributed to this article

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