Winn-Dixie bonds pushed up by spike in when-issued shares; Dura bonds off on swaps, DIP facility gains

By Ronda Fears

Memphis, Nov. 28 - The bonds of recently bankrupt Winn-Dixie Stores Inc. were the trade du jour Tuesday with the paper up nearly 10 points on a more than 10% spike in the when-issued stock - fueled by strong buying the day before.

"It was the tail wagging the dog," said a distressed bond trader.

"The shares caught a good buyer and the bonds went up. It was a good arbitrage trade."

The Winn-Dixie bonds soared Tuesday to 77/80 from 70 on Monday.

Winn-Dixie bondholders will get an equity distribution from its Chapter 11 reorganization - part of a total authorized count of 150 million shares of common stock. The Jacksonville, Fla.-based grocery chain, which emerged bankruptcy last week, plans to distribute roughly 54.5 million new shares per the reorganization plan in three to four weeks.

Under the plan, Winn-Dixie noteholders will initially receive 62.69 shares of new common stock per $1,000 of claim and, on subsequent distribution dates, any excess new common stock held in reserve, for a recovery of 95.6%.

Meanwhile, the when-issued shares had a slow start in the when-issued market two weeks ago, opening in the $11 neighborhood and dipping from there, but the shares got a big buyer Monday that moved the price back to the $11 area. Some 2.3 million shares traded Monday, which traders said was remarkable.

The stock on Tuesday spiked up $1.13, or 10.28%, to $12.12.

Another sellsider said one line of thought among the buyers is that Winn-Dixie could be a real estate play, thinking that the company's remaining properties are valuable. Since going into bankruptcy, Winn-Dixie has closed 326 stores, aiming at a restructured operation of about 587 units in its core market areas in the Southeast United States.

Winn-Dixie filed bankruptcy in February 2005 in part blaming tough competition from the likes of Wal-Mart Stores Inc., which has in recent weeks said it would cut grocery prices by as much as 20%.

But Winn-Dixie said it expects to emerge with only a minimal amount of long-term debt on its balance sheet. In connection with its emergence from Chapter 11, Winn-Dixie has a new $725 million exit financing facility.

Dura bonds dive 1.5-2 pts

To the downside, Dura Automotive Systems, Inc.'s bonds fell sharply after derivatives dealers staged an auction Tuesday for the bankrupt Rochester Hills, Mich.-based auto parts supplier's credit default swaps.

"It reset the value of the bonds, you might say," one trader said.

Dura's 8 5/8% notes due 2012 dropped to 23.5/24.5 from 25/26 and the 9% notes due 2009 fell to 3.5/4.5 from 5.5/6.5, according to traders.

In what one trader referred to as a "ground-breaking" move, the International Swaps and Derivatives Association said on Nov. 8 it created a protocol that will allow cash settlement of individual Dura default swaps rather than the standard requirement to deliver the bonds.

The price of swaps backed by the 9% subordinated bonds was set at 3.5, after the auction saw more sellers of the bonds than buyers, one trader said, noting there were 12 dealers participating in the auction. The bonds had a net balance of $77 million to sell the debt. The senior 8 5/8s were fixed at 24.125, with a net balance of $20 million to sell the debt.

Dura filed for Chapter 11 bankruptcy protection on Oct. 30, hurt by production cuts by major U.S. automakers and escalating costs of raw materials.

Dura DIP frees, trades up

Dura's debtor-in-possession financing facility freed for trading during Tuesday's market hours and went higher, however, with the $150 million term loan B quoted at 100 bid, 100.25 offered, according to a market source.

The term loan B is priced at Libor plus 325 basis points. During syndication, pricing on the tranche firmed up at the midpoint of original guidance of Libor plus 300 to 350 bps.

Dura's $300 million DIP facility also includes a $20 million synthetic letter-of-credit facility priced at Libor plus 325 bps and a $130 million asset-based revolver priced at Libor plus 175 bps. Price talk on the synthetic letter-of-credit facility had also originally been Libor plus 300 to 350 bps.

Goldman Sachs, GE Capital and Barclays were lead banks on the deal.

Dura has already obtained final court approval for the DIP facility.

Airlines off on profit taking

In another negative move, continued profit taking in Delta Air Lines Inc. pushed those bonds lower by another point and Northwest Airlines Corp. paper followed suit, both also pressured by rising oil prices.

Delta bonds lost 1 to 2 points across the board, traders said, with the 8.30% notes due 2029 ending at 58/60. Northwest's bonds were seen lower by 3 to 4 points with the 8 7/8% notes due 2006 falling to 83/85 after trading as low as 82.

As oil futures climbed 67 cents Tuesday to $60.99 a barrel on the New York Mercantile Exchange, reportedly US Airways Group Inc. will be pitching its $8.6 billion unsolicited offer for Delta in a meeting later this week with Delta and the unsecured creditors committee in the Atlanta-based No. 3 domestic carrier's bankruptcy case.

Tempe, Ariz.-based US Airways has said since presenting its bid Nov. 15 that it was pursuing a meeting with Delta, but the exact time and place of the meeting have not been disclosed. Delta has been against the merger and has said it plans to present a standalone plan by next month.

Tembec slides

Other noteworthy moves in the distressed debt circles included another big decline for Tembec Industries Inc., which one trader attributed to a retreat from earlier gains on news it will reopen a suspended sawmill on a temporary basis.

"Opening the mill is a temporary thing, it won't mean much in the long run," the trader said.

Tembec's 8 5/8% notes due 2006 were described as lower by 2 points at 61/62, following a 2-point decline Monday.

The Montreal-based forest products company's bonds got a bounce a week ago on news it will reopen a suspended sawmill on a temporary basis. In addition, the trader reported seeing some profit taking in the wake of Tembec's improved third-quarter results, which also were released last week.

Tembec reported that it lost C$54.5 million, or C$0.64 cents a share, narrowed from C$134.9 million, or C$1.58 a share, in the year-ago period. However, the company expressed concern about softening demand for newsprint, its key product, and the U.S. housing downturn, which depresses demand for lumber.

Adelphia adds 3 points

Back to the gainers, Adelphia Communications Corp.'s bonds were higher as the flagging Greenwood Village, Colo.-based cable operator approaches its emergence from bankruptcy after a more than four-year ordeal.

Adelphia's 10¼% notes due 2006 gained 3 points to 82/84 and the 10¼% notes due 2011 also added 3 points to 86/88.

A hearing is slated for Dec. 7 on a settlement between the company and its official committee of unsecured creditors regarding inter-estate issues. Under the settlement, parties have agreed to increase the amount to $1.13 billion from $1.08 billion allowed to Adelphia from the distributions of Adelphia's subsidiaries.

In addition, they have agreed that the value of the Time Warner Cable class A common stock would be increased to $5.1 billion from $4.85 billion. Proponents of the agreement estimate that the unsecured creditors of subsidiary Arahova will receive about 102 cents out of a possible 140 cents of potential recovery, according to the filing.

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