Winn-Dixie notes drop again; Adelphia debt easier

By Paul Deckelman and Sara Rosenberg

New York, Feb. 3 - Winn-Dixie Stores Inc. notes suffered through a third consecutive session on the slide Tuesday in the wake of the supermarket operator's recently reported earnings loss. Among bank debt issues, Adelphia Communications Corp. paper was being quoted lower.

Bonds of Winn-Dixie, the Jacksonville, Fla.-based operator of more than a thousand supermarkets, mostly in the southern U.S. and some in the Bahamas, has been cascading downward ever since Friday, when the company unexpectedly reported a sizable loss in the latest fiscal quarter, versus a year-ago profit. After tumbling 15 points on Friday into the mid-80s from prior levels above par, the bonds continued to retreat on Monday and again on Tuesday.

Winn-Dixie "was the name du jour," a trader said, quoting its 8 7/8% notes due 2008 as having dipped as low as 79 bid, 82 offered from Monday's close at 85.5. But the bonds "bounced a little off their lows" to end the day's dealings at 81.5, "off the lows, but still down on the session." However, he said, compared with the sharp fall that the bonds had taken previously, especially on Friday, "they've stabilized for the moment."

Another trader saw the bonds closing at 80.5 bid, 82 offered, but had seen them earlier in the session as low as 79.5 bid, 81 offered. Yet a third trader pegged them as "down a few points," at 81.

When the bonds had been trading above par as recently as last week, several traders called those levels unrealistic and not in line with the company's economic fundamentals, attributing the rise to the general junk market surge seen in the latter part of last year and for most of January.

Winn-Dixie - which operates in an extremely competitive, low-margin business to begin with - has been strongly impacted by the competition its long-established stores face in many markets from discount retailing giant Wal-Mart Corp.'s entry into the supermarket business via its huge superstores, which combine features of traditional supermarkets with those of discount stores and pharmacies.

Winn-Dixie on Friday reported that it had lost $79.5 million (57 cents a share) in the fiscal second quarter ended Jan. 7 - a sharp turnaround to its year-ago performance, when it earned $91.4 million (65 cents a share). Analysts were looking for a small profit in the nine cents per share range.

The company's equity has fallen in tandem with the bonds; in Tuesday's dealings, Winn-Dixie's New York Stock Exchange-traded shares - which had plunged nearly 30% on Friday on twenty times their normal volume - were again down, dropping another 44 cents (7.04%) to $5.81. Volume of 9.7 million shares was more than five times the norm.

Adelphia off with soft bank market

Elsewhere, Adelphia Communications' TCI bank debt was seen trading at 98.75, about a quarter of a point lower on the day when compared to the previous bid level of 99, a trader said.

The trader attributed the dip to an overall softness that was seen in the bank loan market due to some volatility in the bond market, although a trader in distressed bonds, asked if anything was doing with the bonds of the bankrupt Greenwood Village, Colo.-based cable operator, shook his head and flatly declared "nope, been quiet."

At another desk, however, Adelphia's bonds were actually seen as having firmed, with its 9 7/8% notes due 2007 quoted at 101.5 bid, up a point on the session, and the 8 7/8% notes due 2007 of its Century Communications Corp. subsidiary slightly firmer, in the 109 range.

Adelphia debt has recently traded up as the credit has neared the point where it might soon be coming out of bankruptcy; it is reportedly seeking to line up some $8 billion of exit financing. Last week, company executives said that when the troubled cabler emerges from reorganization, current shareholders will be frozen out, since Adelphia - which plunged into bankruptcy in 2002 amid allegations of massive looting of corporate assets by members of the founding Rigas family - is much less solvent than was originally estimated.

However, that declaration has the potential for setting up a nasty dispute with the current shareholders over the company's valuation, which could complicate its efforts to extricate itself from bankruptcy.

Calpine firmer

Also on the bank-debt front, there were some exceptions to the general weakening, debt traders said, including Calpine Corp.'s second-lien loan, which moved up by about a quarter to a half a point on Tuesday.

They said the San Jose, Calif.-based power company's paper was quoted at 98.5 bid, 99 offered.

"It came back a little today after falling off last week on market technicals," one trader remarked.

Also on the upside was the bank debt of spaghetti maker New World Pasta Co., quoted half a point better at 88.75 bid.

Bankrupt Italian dairy products maker Parmalat Finanzaria SpA's dollar-denominated 6 5/8% notes due 2008 and its euro-denominated bonds continued to hover around the 13 bid area, a trader said, with little real activity.

He also saw little going on among the bonds of asbestos-challenged companies such as Federal-Mogul Corp.; the bonds of the bankrupt Southfield, Mich.-based maker of automotive brakes were seen unchanged around 26 bid, 27 offered.

Kaiser Aluminum's bonds were seen down a point on the session, with its senior notes hovering at bid levels in the 88-90 range while its subordinated debt was languishing around 17 bid, "but there was no big movement there," a trader said.

A market source at another desk however, in quoting the Houston-based metals company's 10 7/8% notes due 2006 and 9 7/8% bonds at 88, noted that just a couple of days ago, they had been bid at 91."

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