BP, ATP Oil debt regain some ground; Blockbuster finds a floor, trader says; broad market mixed

By Stephanie N. Rotondo

Portland, Ore., June 10 - Distressed debt was generally mixed during Thursday trading, though bids started to roll in late in the day, leaving some to speculate that Friday would be a good trading day.

The market started off "trading off to sideways," a trader said. However, "that really changed in the last hour of the day," as volumes picked up and bonds caught "a bit of an underlying bid, which I think will continue into [Friday]," he said.

"[Friday] is going to be the real day," he said, opining that there "should be some follow through."

Traders said it was BP plc that was the nom du jour, as has been the trend of late. But after being on the weak side for the last few sessions, the bonds managed to move up 2 to 3 points, which in turn also helped sector peer ATP Oil & Gas Corp. gain some ground.

Blockbuster Inc.'s bonds might have found a floor, according to one market source. The Dallas-based movie rental chain's debt dipped more in trading.

BP, ATP regain ground

Oil companies got a boost during Thursday trading, traders reported, with BP - which is now trading off of junk desks - leading the way.

Oil producer BP saw its bonds "bounce back by 2 to 3 points," a trader said.

The trader said the 5¼% notes due 2013 were the "most active" at 95 3/8, up 3 points, while the 3 7/8% notes due 2015 were also up 3 at 901/2. The 1.55% notes due 2011 were meantime up a deuce at 941/2.

Another trader said BP's bonds "made up the bulk of trading," with "hundreds of millions" turning over. He pegged the 3 7/8% notes at 88 bid, 90 offered.

"Everybody is feeling around," he said, noting that part of the gyrations in the debt was "half sentiment-driven."

"Lots of people are selling one to buy another," he added.

Also in the oil arena, ATP Oil & Gas' 11 7/8% notes due 2015 firmed up slightly after being on the losing end for the last few sessions.

A trader quoted the paper at 66 bid, 68 offered.

"That's up a good point," he said.

At another desk, a trader said the notes opened up the day stronger at 66 bid, 67 offered. However, the bonds gained little momentum and stayed there throughout the day, he added.

Questioning BP's junk status

Still, not everyone understands BP's fall to junk status.

"It doesn't make sense," BP spokesman Toby Odone was quoted as saying in a Bloomberg report. "We are generating significant cash flow because the oil price is higher than $60 a barrel. We have a strong asset base."

BP remained in headlines on Thursday, as it was announced that the company would give $75 million to three states - Alabama, Florida and Mississippi - in order to help with clean-up efforts related to the Gulf of Mexico oil leak. That is in addition to the funds BP has already committed to Louisiana.

Also on Thursday, government officials called for the company to halt its dividend payments.

BP's current containment plan is estimated to be getting 630,000 gallons of the gushing oil. The company said it planned to launch a second oil-catching system over the weekend.

Trader: Blockbuster finds a floor

In the retail space, Blockbuster's 9% notes due 2012 might have found a bottom, at least in the opinion of one market source.

The source saw the bonds at 8 3/8 bid, 9 offered.

"People have found the place where they think it will sit for awhile," he said.

Another trader placed the notes at 83/4, calling it "down another buck."

Yet another trader, however, said the debt was unchanged at 81/2, on "moderate activity."

And, Rite Aid Corp.'s 8 5/8% notes due 2015 were seen slipping nearly 2 points, ending at 77½ bid.

Broad market mixed

Also in the distressed market, General Motors Corp.'s 8 3/8% notes due 2033 slipped a bit to 31 bid, 31½ offered, according to a market source.

Another source called Smurfit-Stone Container Corp.'s 8¼% notes due 2012 up 4 points at 82½ bid.

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