OPTI Canada owns an equity stake in an oil sands operation. Equity investors in OPTI Canada (TSX: OPC) have not been feeling too good lately – the latest catalyst to their downfall has been them sacking their prior consultants that they employed failed to find “strategic alternatives” (a.k.a. creative financing or an outright sale).
The following is a chart of their recent trading:
Equity investors have lost about 60% of what remains of their investment.
Looking quickly at the financial statements is a company that has a massive amount of debt and little chance of being able to pay it off. They have a total debt of about $2.6 billion. One major maturity will start on December 15, 2012 – approximately $525 million. As there is no chance of internal cash flows being able to pay off this amount in the next 22 months, they will either have to renegotiate some package with their creditors or take their chances in bankruptcy court. Either way, the equity investors in OPTI still look like they are holding an overvalued stock.
Bond traders are not faring much better – OPTI has two issues of senior secured notes, due 2014 and par value of $1.75 billion – they are now trading at 49 cents on the dollar, down from 80 cents back in November 2010. These bonds are effectively junior to $850 million of other debt that is due to mature at an earlier date.