Winn-Dixie numbers better than expected; Leap loans continue easing

By Paul Deckelman and Sara Rosenberg

New York, April 30 - Winn-Dixie Stores Inc.'s fiscal third-quarter results were better than expected Friday, although it didn't seem to have very much impact on the Jacksonville, Fla.-based supermarket chain's bonds, which were essentially unchanged.

Elsewhere, the party is truly over for Leap Wireless International Inc.'s investors, as its bank debt continued its descent for a second straight session on Friday, this time dropping by about two points on the day. Once again, as was reported on Thursday, the fall was in reaction to the equity market's performance.

The bankrupt San Diego-based communications company's bank debt was quoted at 105.5 bid, 106.5 offered by one trader and quoted by a second bid at 106 even. In comparison, on Thursday the paper had been quoted at 107.5 bid, 108.5 - and that was lower by about a point from previous levels.

"It's heavy because MCI equity was down two points in [the] last 24 hours and [the] overall equity market melted" Friday, one trader explained.

The paper had until now been rallying, moving up from below par at the start of the week to reach heights of 108.5 bid, 109.5 offered by mid-week, because people believe there is good equity value behind the name. The company filed for Chapter 11 protection about a year ago.

Furthermore, based on this belief, there has been a surge of technical pressure pushing the bank debt higher, as equity-type players who were not previously getting involved in the paper when it was quoted below par bought into it.

Junk bond players, however, never got with the program, with the company's two issues of distressed bonds continuing to languish in the lower-to-mid teens.

Winn-Dixie little changed

Else where, Winn-Dixie bonds were seen to have gone nowhere, hanging in little changed around 91 bid, 92 offered, despite the release of surprisingly positive quarterly results.

Winn-Dixie reported net earnings of $600,000, or break-even on a per-share basis, well down from $50.6 million (36 cents per share) in the year-ago quarter. But Wall Street was expecting a loss in the area of nine cents per share so the market, in the words of one trader, was "initially shocked" when Winn-Dixie did better than expected.

Even so, he said, "the strange thing was that the bonds initially went down," with company's 8 7/8% notes due 2008 trading down to levels below 90 bid, and then edging back up to end little changed at 91 bid, 92 offered.

"People didn't think they would break even," he said, "but then, they just shrugged [the fact that it did] right off."

Another trader saw "nothing" in Winn-Dixie, quoting them at 90 bid, 92 offered. "It was no big deal at all, no great shakes."

Fleming also little changed

Also in the supermarket sphere, little action was seen in the deeply distressed bonds of Fleming Cos. Inc. - even though CVCMA LLC, a group of Dallas- and Austin-based executives, have offered to purchase the assets of Fleming's Core-Mark International and all related entities for an unsolicited all cash bid of $315 million, subject to due diligence.

Fleming's bonds, a distressed-debt trader said, have been at 13 bid for a while and "really haven't moved" from there.

The investment group made its intentions known in a letter to Fleming and its key financial and legal advisors.

Core-Mark is the last remaining key asset of Fleming. The Lewisville, Tex., wholesale grocery distributor is currently reorganizing under Chapter 11 before the federal bankruptcy court in Wilmington, Del.

MCI lower

Elsewhere in distressed-debt dealings, the trader saw MCI Corp.'s new bonds "down a little bit," quoting the recently emerged telecom giant's new 10 year notes at 92.5 bid, 93.5 offered, and said its other recently issued bonds were likewise easier, "mostly as a function of the [company's] stock, which got crushed, down two-and-a-half."

He saw not much happening with Princeton, N.J.-based telecom and broadband operator RCN Corp., whose notes and other bonds had firmed sharply to about 52 bid, a gain of six points, earlier in the week, as the company continues talks with its creditors about the possibility of a consensual restructuring of the company's debt. The trader quoted RCN's 11 1/8% notes at 51.5 bid, 52.5 offered.

Telewest Communications plc's 9 5/8% notes due 2006 were off a point at 62.25 bid.

The trader also quoted Trico Marine Services Inc.'s bonds at 45.5 bid, 47.5 offered, down slightly from their week's highs at 47 bid. The bonds have been trading flat, or without interest, ever since the Houma, La.-based provider of maritime services to the off-shore oil drilling industry said it was exploring various alternatives, including selling assets, raising additional financing and restructuring its debt, including its $250 million of senior notes due 2012.

Also unchanged was Levi Strauss & Co. Inc., which "didn't move much [Friday], but is higher on the week"; the San Francisco-based blue jeans maker's 12 ¼% notes due 2012 were at 90 bid, 92 offered, "up one or two" points on the week.

Gainers on the session also included Doman Industries, whose notes were at 35 bid, up "a point or so from the other day." a trader said. And Pegasus Satellite's 12 3/8% notes due 2006 were two points better on the session, closing at 67 bid.

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