Delta's short paper edges up 1 point; Winn-Dixie sacked by 2 points; Tekni-Plex slips on cut

By Ronda Fears

Nashville, Sept. 17 - Amid thin trading action throughout the markets Friday, most of Delta Air Lines Inc. paper was "grinding sideways," as one sellside trader put it. Specifically mentioned were the long-dated bonds of the troubled airline, including the two convertibles, while the shorter 7.7% issue edged up by about a point.

There was no news, nor even rumors, about Delta's talks with union pilots - regarding early retirements foremost, and then wage concessions - to move Delta's bonds, traders noted, although the stock slipped by about 1.25% in very light trading. The negotiations are expected to last through the weekend and maybe into next week but face an Oct. 1 early retirement option deadline.

Delta's 7.7% notes due 2005 gained 1 point to 50 bid, 52 offered while the longer bonds were steady with the 8.3% due 2029 issue at 26 bid, 28 offered. The 8% convertibles due 2023 were at 34.5 bid, 35.5 offered and the 2.875% convertible due 2024 at 37.5 bid, 38.5 offered, both unchanged on the day. Delta shares, meanwhile, dropped a nickel to $3.96.

Winn-Dixie Stores Inc. notes were sacked as hurricane damages raise concern for the Jacksonville, Fla.-based supermarket chain. Plus news emerged late Thursday that the company's long-time chairman is leaving. The bonds dropped 2 points, but traders said there were buyers and the notes fared better than Winn-Dixie shares, which fell 8% on the day.

Tekni-Plex Inc. bonds dropped again Friday, about a point or so, as Standard & Poor's cut its credit ratings after the Coppell, Texas-based plastic goods manufacturer warned of an upcoming net loss that would bust the financial covenants on its bank revolver and bank loans.

Adelphia Communications Corp. bonds were off about a point, too, without any news to drive the move, a distressed trader said. He pegged the 10¼ bonds due 2011 at 92 bid, 93 offered, while Adelphia shares were unchanged at 40 cents.

Salton Inc. was a heavily traded name on distressed desks Friday, traders said, with those bonds moving up 3 or 4 points this week. The 12¼% notes due 2008 were pegged at 83 bid, 84 offered and the 10¾% senior notes due 2005 at 93 bid, 94 offered.

"They've [Salton bonds] been a little better every day," a sellside trader said. "They had gotten kind of beat up because they had saturated the U.S. market with George Foreman Grills. But then about a week ago they released their 2004 results and gave some upbeat guidance for 2005 saying they're trying to squeeze out some costs. And they think that internationally the world is ready for the George Foreman Grill."

Winn-Dixie bonds off at 85/87

A triple play of hurricanes, with tropical storms Jeanne and Karl threatening to hit Florida again, have been hurting Jacksonville, Fla.-based Winn Dixie, and then the story took another blow after learning that the supermarket chain's long-time chairman is exiting.

"There are lots of Winn-Dixie stores still closed from [Hurricane] Charley, the [Florida] panhandle is a disaster, and now the chairman is retiring and another hurricane, or tropical storm, is on the way to Florida," said a distressed bond trader.

"They [hurricanes] have likely caused irreparable harm to WIN's cash flow, which negatively impacts their ability to use credit, which prevents them from making the needed capital improvements, which they need to do to compete, which means they are headed for extinction."

On the other hand, he added, there are ready buyers for Winn-Dixie paper, as "foodstuffs are considered to be one of the basic necessities for human survival." He said there has been a big influx of hedge funds getting involved in the Winn-Dixie story, putting on "pretty heavy hedges, upwards of 70%."

Winn-Dixie has been slammed amid questions over concerns about its survivability after announcing several months ago a turnaround plan that included several asset sales aimed at improving its competitive positioning.

The company announced late Thursday that chairman A. Dano Davis will retire from the board of directors after 35 years with the company. H. Jay Skelton, president and chief executive of holding company DDI Inc., has been nominated to fill his seat on the board.

Winn-Dixie's 8 7/8% bonds due 2008 dropped 2 points to 85 bid, 87 offered. The bonds are about 3 points or so lower than earlier this month when the company announced the sale of its Dixie Packers manufacturing facility in Florida to The Smithfield Packing Co. Inc. for an undisclosed amount. Winn-Dixie shares Friday plunged 33 cents, or 8% on the day, to $3.87 amid heavy volume with 2.68 million shares changing hands versus the three-month running average of 1.54 million.

Tekni-Plex steady to off 1 pt

Tekni-Plex bonds slipped Friday after S&P lowered its credit ratings on the heels of the company announcement midweek that it is in default on its bank revolver and senior secured term loan due 2008 due to a projected net loss.

The Tekni-Plex 12¾% subordinated notes due 2010 fell to 85 offered from 86 offered on Thursday, and the 8¾% senior secured notes due 2013 were pegged at 92 bid, basically unchanged.

The Somerville, N.J., packaging products manufacturer is working with its banks to try to get waivers or amendments on its revolver and term loan covenants. Meanwhile, S&P has the credit on negative outlook.

S&P expressed concern about the company's net loss during the important final quarter of its fiscal year, as well as constrained liquidity and cash generation.

Negative free cash flows underscore challenges Tekni-Plex already faces, S&P said, due to sluggish sales of garden hose products owing to an unseasonably cool and wet summer and significantly higher raw-material costs, particularly polyvinyl chloride resins.

Tekni-Plex's ability to obtain an amendment to its credit agreement would be key to preserving short-term liquidity and add support to its credit ratings, S&P said.

Atkins loan up on earnings

In the bank loan market, news Friday that Atkins Nutritionals reported earnings numbers in line with expectations calmed market players' nerves following fears heard earlier in the week that the company might require a waiver.

One trader had the company's first lien paper up on the session, trading in the high 80s.

"The earnings numbers were definitely in line with what people expected, which is why the paper is better."

Another source had the first-lien paper at 87.50 bid, 89.50 offered, from 80 bid, 83 offered on Thursday.

Meanwhile the source reported that the second-lien paper rose to 65 bid, 67 offered from 58 bid, 62 offered on Thursday.

Mirant higher on plan rumor

Back among bonds, news of possible progress in Atlanta, Ga.-based Mirant Energy's Chapter 11 case created some lift in the independent power producer's paper.

The 8.30% notes due 2011 traded up about 1.5 points to 87.375, one source said, adding that the 8½% notes due 2021 up a point to 87 from 86.

Meanwhile a trader had the Mirant Americas Generation 8.30% notes due 2011 at 86.75 bid, 87.75 offered.

"Those have been moving up a little every day," added the trader.

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