Winn-Dixie gains on private equity news, Fairfax up; WMG brings $800 million deal to the U.S.

By Paul Deckelman and Paul A. Harris

New York, March 23 - Bonds of supermarket operator Winn-Dixie Stores Inc. were quoted up two to three points across the board Tuesday on news reports that the beleaguered Jacksonville, Fla.-based supermarket operator hopes to convince a private equity investor to buy a piece of the company. Fairfax Financial Holdings Ltd.'s bonds rose on the Toronto-based insurance concern's plans for debt revision.

Primaryside activity was quiet Tuesday, although WMG Acquisition Corp. was heard beginning a roadshow for its upcoming $800 million issue of ten-year notes.

In the secondary market, dealings were seen generally quiet, with a three-day Lehman Brothers conference in Florida in the second day.

Winn-Dixie's 8 7/8% notes due 2008 were seen having risen to 89.5 bid during the session, versus prior levels about two or three points lower.

Its 7.03% bonds due 2027 were quoted at 83.5 bid, 84.5 offered, up about two points from their recent levels, and its 8.181% subordinated bonds due 2024 were three points above recent levels, ending at 78.5 bid, 79.5 offered.

On the equity side of the ledger, Winn-Dixie's New York Stock Exchange-traded shares jumped 73 cents (9.93%) in Tuesday dealings to $8.08. Volume was 9.6 million shares, more than four times the norm.

The bonds and the shares were said to have caught a bid after thedeal.com reported that the company "has been shopping itself to private equity investors because the family that owns the supermarket chain fears losing its fortune in a bankruptcy filing, according to investment bankers."

A trader said that the market "seems a little bit softer, with decent selling going on. Guys are looking to hit bids in some stuff."

He said "you still have continued better yield-to-call type buyers and sellers of anything that has potential hair on it."

Imaging bonds active

The trader saw no new-issue activity. But he saw the coming new deal for diagnostic imaging outpatient services provider Radnet/Primedex Health Systems as giving a bid to the existing bonds of such providers of diagnostic imaging services.

"Imaging bonds were quite active," he said, with "everybody trying to figure out what the relative values are" between the anticipated Radnet/Primedex bonds and the outstanding notes of such companies as Radiologix Inc., InSight Health Services Corp., Alliance Imaging Inc. and MedQuest Inc.

He saw the group as a whole "off maybe a quarter to a half a point," with "better buyers at lower levels." He quoted Insight's 9 7/8% senior subordinated notes due 2011 at 100.5 bid, 101.5 offered, Alliance Imaging's 10 3/8% senior subordinated notes due 2011 at 99 bid, par offered, and MedQuest's 11 7/8% senior subs due 2012 at 113 bid.

Elsewhere, he saw Portola Packaging Inc.'s 8¼% senior notes due 2012 "continuing to struggle," falling to around 84 bid, 86 offered from prior bid levels around 86.

The San Jose, Calif.-based packaging maker's bonds have been cascading down lately, sinking from above par into the lower 90s after the company reported disappointing quarterly earnings, and then continuing to erode down to their current levels.

Nextel better on upgrade

But he saw Nextel Communications Inc. bonds about half a point better across the board in the wake of Monday's ratings upgrade by Standard & Poor's which raised the Reston, Va.-based wireless telecommunications company's corporate credit rating two notches to BB+ from BB- previously, with a positive outlook, while upping the rating on Nextel Finance's bank loan to BBB from BB.

S&P said the ratings upgrade "reflects a significantly improved expectation that Nextel will be able to maintain a competitive edge in the next few years with its differentiated service offerings," such as its signature push-to-talk walkie-talkie-like service and customized applications. Nextel's 7 3/8% notes due 2015 were heard a point better at 108.5 bid.

Fairfax up

Another trader saw Fairfax Financial Holdings' bonds were firmer after the company announced that it intends to offer to exchange cash and new notes for up to $275 million principal amount of its existing 7 3/8% senior notes due 2006 and for up to $170 million principal amount of its existing 6 7/8% senior notes due 2008.

He saw the 7 3/8% 2006 notes moving up to 104.5 bid from 103 bid, 104 offered, while the 6 7/8% notes were in the "106ish area."

The company's 7 3/8% notes due 2018, which are not being taken out, were seen two points better at 96 bid.

Overall, he said, the market seemed flat on the session, and "we had been down on the day, so [ending flat or only down a point] is a positive."

He said that "the stuff that was trading, that had movement, either had news or there had been a lot of shorts. I don't know if it's a real run-up or what."

Primary stilled by conference

Sources attributed the leaden condition of Tuesday's high-yield primary market to the attention currently being garnered by Lehman Brothers' 2004 High Yield Bond and Syndicated Loan Conference, now underway in Orlando, Fla.

In addition, sources cited continued weakness in the equity market, as the Dow Jones Industrial Average declined by a single point as it ended its fourth consecutive losing session.

Warner Music hits road in U.S.

News in the primary market came from Deutsche Bank Securities, which began the U.S. roadshow Tuesday for an $800 million 10-year offering (B-) from WMG Acquisition Corp. (Warner Music Group).

The New York City-based global music company anticipates selling approximately $615 million and £100 million of notes, with pricing expected to take place on April 1 or 2.

In addition to Deutsche, the joint bookrunners are Bank of America Securities, Lehman Brothers and Merrill Lynch & Co.

Proceeds will be used to help fund the acquisition of Warner Music Group from Time Warner by Thomas H. Lee Partners, Edgar Bronfman's Music Capital Partners and Bain Capital.

ITC^DeltaCom hangs up on $300 million

Also on Tuesday ITC^DeltaCom announced the withdrawal of its offering of $300 million of second priority senior secured note (Caa2/CCC+).

"We initiated this transaction for the purpose of opportunistically refinancing our indebtedness with a combination of floating-rate and fixed-rate senior notes," stated Doug Shumate, the company's chief financial officer, in the release.

"However, generally weaker market conditions and a stronger preference among investors for fixed-rate notes made the refinancing unattractive at this time."

Although tranche sizes remained to be determined, the West Point, Ga. telecommunications and technology services company was offering seven-year non-call-four fixed-rate notes, which were being talked at a yield in the 11% area and six-year non-call-two floating-rate notes, price talked at Libor plus 700 basis points.

Banc of America Securities and Bear Stearns & Co. were joint bookrunners.

Focus on supply and funds flows

One sell-side official late Tuesday told Prospect News that a negative turn in the flow of cash to high-yield mutual funds, taken in conjunction with a robust new deal pipeline, could push the dynamics of the primary market further in favor of investors.

"Right now the focus is on supply and on the funds flows," said the source.

"If the funds flows stay low it could eventually put some pressure on prices because we still have a substantial calendar."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.