Winn-Dixie bonds continue to ease; Federal-Mogul debt up

By Paul Deckelman and Sara Rosenberg

New York, Feb. 2 - Bonds of Winn-Dixie Stores Inc. were down for a second consecutive session Monday, continuing their retreat in the face of the unexpected quarterly loss reported on Friday. Meanwhile, bank debt of bankrupt auto brakes maker Federal-Mogul Corp. was quoted as firming up.

Winn-Dixie's 8 7/8% notes due 2008, which had swooned some 15 points on Friday down to levels around 86 bid from 101 previously in response to the poor earnings news, started retreating right out of the gate on Monday, traders said, opening at around 85 bid, 87 bid, and finally dropping to a low of 83 bid, 85 offered.

The Jacksonville, Fla.-based supermarket operator announced Friday that it had a net loss of $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). While analysts had been expecting a severe fall-off in earnings, they still expected the company to at least earn a small profit in the nine cents per share range. When that did not materialize, both the company's bonds and its shares nosedived on Friday.

In Monday's dealings, while levels were lower, a trader said that "there was a lot of quoting going on" in the issue, "but not a lot of buying." For instance, he said, his shop at one point tried to buy some Winn-Dixie bonds at a bid of 83.5, but found no seller. "The market trades to an order and then bounces several points. No one is trading names with much conviction."

A trader at a distressed-debt shop declared that nothing really was going on from his vantage point.

"We had only five markets all day," he said, noting that many junk players and distressed investors were away at the J.P. Morgan Chase high yield conference taking place in New Orleans. "The market was shut down. It was a dead day," he said.

Federal-Mogul loans higher

One area where there did seem to be some activity was in the bank debt of asbestos-related names, which continued to feel stronger, with Federal-Mogul highlighted as one such mover.

The Southfield, Mich.-based automotive parts manufacturer's bank paper was quoted at 90.5 bid, 91.5 offered, up a quarter of a point from Friday's levels of 90.25 bid, 91.25 offered, according to a trader.

At another desk, the paper was quoted bid at 91.92, well up from Friday's 90.08.

Federal-Mogul has been on somewhat of a run recently, moving up by about five points over a time span of about two-and-half weeks, the trader said.

"It's moved up with the rest of the market. But also, a judge on one of the trials might step down. He's been one of the fighters of the claims and holding up the whole process," the trader explained.

However the Federal-Mogul's bank debt was not seen trading on Monday as the general market was incredibly quiet, the trader added.

In addition, judge Alfred Wolin decided not to recuse himself from the Chapter 11 cases of W.R. Grace & Co., Owens Corning and USG Corp. (See report elsewhere in this issue).

Exide eases

Elsewhere on the bank-debt front, Exide Technologies Inc.'s paper was seen easier, dipping to 80.42 bid from 80.83 on Friday. The bankrupt Princeton, N.J.-based storage battery maker's 10% notes due 2005 were meanwhile seen at 26 bid, down about a point-and-a-half from Friday's levels.

Among other bankrupt names, Amerco Inc. said that the court overseeing its reorganization had okayed its plan of reorganization; the Reno, Nev.-based parent of the well-known U-Haul trailer rental company indicated that it could emerge from Chapter 11 in about a month.

However, the company's 8.80% notes due 2005 were quoted at 107 and the company's other issues were at 104, "pretty much where they already had been," a market source said.

"There was no change," in the company's bonds, "all remained above par," a trader said, noting that approval of the plan had been generally expected.

Under terms of the plan, the company will pay its creditors about $1.2 billion with a combination of cash and new notes. Equity holders, meantime, will not see their investment diluted, since the revamped Amerco is not issuing any new stock.

Among other bankrupt names, the trader said, UAL Corp., the parent of United Airlnes was seen a little firmer, its bonds a point better, at 15 bid, 15.5 offered. He saw Mirant Corp. notes firmer by about a point or two, while Atlas Air Worldwide Holdings Inc., which filed for Chapter 11 status late Friday, "was in the low 40s. No change there."

The Purchase, N.Y.-based cargo airline said it would continue operations while it develops a plan of reorganization. It announced that it had received commitments for some $50 million in debtor-in-possession and exit financing from CIT Group Inc. and Ableco Finance LLC, an affiliate of Cerberus Capital Management LP.

The trader also saw the bonds of Parmalat Finanzaria SpA about a point easier, in quiet trading. The Italian dairy producer's dollar-denominated 6 5/8% notes due 2008 and its euro-denominated bonds have recently been trading in the low teens, following recent revelations that the company's debt load was much greater than originally estimated.

Revlon pays off bonds

Back among companies considered in trouble but not yet bankrupt, Revlon Inc.'s REV Holdings 12% notes, which matured on Feb. 1, will no longer be seen; a company spokesman told Prospect News that all of the bonds which were not tendered for exchange in a recent company exchange offer were paid off at par. He did not have a figure for that amount.

Speculation among investors that the bonds would be paid off as scheduled had recently lifted them into the 90s, although some traders continued to question whether the beleaguered New York-based cosmetic company's chairman, New York billionaire Ronald O. Perelman, would in fact pay off the bonds, citing other incidents involving bondholders in Perelman-controlled companies who felt that he did not do right by them. However, in this case the bonds were in fact paid off as scheduled.

Other Revlon debt was unchanged on the news, its 12% senior notes due 2005 hovering in the 104-105 area, while its 8 1.8% notes due 2006 were at 72 bid and its 8 5/8% notes due 2008 were at 53.

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