OPTI Canada's hiring of Lazard Frères & Co. is a sign that the oil sands developer is "preparing for either a debt restructuring or a bankruptcy proceeding" according to RBC Dominion Securities.
The firm said in a note to clients that OPTI stock is "going to zero" as a restructuring "could occur by June 2011 but with a high degree of probability by year-end 2011."
The firm argues there's not much room for escape for Opti's shareholders.
"OPTI's balance sheet is grossly over leveraged," and the company's operations at its Long Lake oil sands project " wll not improve quickly enough to afford OPTI positive cash flow before the company exhausts its liquidity."
The company could try to raise more debt but RBC "believes that it would be irresponsible for the company to seek additional debt financing, as it does not believe the time afforded by such borrowings would change the likely eventual outcome of bankruptcy or restructuring."
What about takeover? Sorry, no, RBC says, arguing "it is highly improbable that a corporate transaction would emerge at this stage."