Winn-Dixie bonds firmer; Adelphia Communications bonds up

By Paul Deckelman

New York, Feb. 18 - Winn-Dixie Stores Inc. notes continued to hover in the upper 50s on Friday, well off the lows that the troubled Jacksonville, Fla.-based supermarket operator's bonds had hit earlier in the week when it disclosed an accounting error - the latest event to shake investor confidence in the company. Several traders dismissed the uptrend in the problem-plagued company's bonds as little more than an atypical blip.

Elsewhere, the bonds of Adelphia Communications Corp. were being quoted higher, although there was no fresh news seen out on the bankrupt Greenwood Village, Colo.-based cable system operator.

Winn-Dixie's 8 5/8% notes due 2008 - which had tumbled as far down as intraday lows of 51 bid, 52 offered earlier in the week with the accounting problem disclosure - were "feeling better," a trader in distressed issues said, quoting them at 58 bid, up two points from where he had seen them close Thursday.

He also saw the company's pass-through bonds, secured by some of its store real estate, were trading around 70 bid.

Another trader noted that the latter issues - its 7.803% notes due 2017 and 8.181% notes due 2024 - had both moved up three points on the session, to 69 bid, 70 offered. He said that the fact that the investors were suddenly lifting the secured paper signaled to him that "bankruptcy is imminent."

He said that at his shop, "we were expecting it [a Chapter 11 filing] today."

He was not the only one.

Winn-Dixie fate a focus

A trader at another desk said that for Winn Dixie, which for about a year now has been closing underperforming stores or those located outside its geographic areas in the southeastern United States but which still has expenses related to those store leases, "the only way out is to do the draconian thing, from a shareholders' standpoint, and file it, and then be able to literally clean the company up, and get a fresh start."

He continued "if you're sitting there, and you've got tens and tens and tens and tens of millions of dollars of expenses on dark [i.e., closed but not yet sold] stores, and you have other stores that are not making anything, but it's cheaper to run them at a loss than to close them down, and carry that lease on your books, how do you clean it up?"

The answer, he said, is "you file. Then you can cancel the lease, and you go on. That's the point that I think they're at - but they've been there for a while, and have just refused to recognize it."

He said that the slide that the unsecured bonds took earlier in the week - after Winn-Dixie disclosed that it had miscalculated its EBITDA in the quarter which ended in September and thus overstated by $100 million its revolver borrowing capacity and its total liquidity at the quarter's end - really was "for no true reason - other than more people [were] just waking up to how bad this really is."

The company's troubles - disclosed about a year ago - drove its unsecured bonds from levels above par down into the 70s and 80s. The bonds eventually crept back up to near-par levels, but they retreated back into the 80s late last year as it became apparent that the company's turnaround efforts were not bearing fruit. Along the way, then-CEO Frank Lazaran was sacked in favor of former Albertson's Inc. president Peter Lynch, who presided over the latest negative earnings report and conference call, on Feb. 10, when the bonds slid into the low 70s from prior levels at 88.

Over the next several sessions, they continued to erode into the mid-60s but then appeared to stabilize. However, Wednesday's announcement of the EBITDA calculation debacle hammered the bonds down into the low 50s; they have since rebounded into the mid-to-upper 50s.

Winn-Dixie sees "dead-cat bounce"

A trader quoted the 8 7/8s Friday as having firmed two points to about 58 but attributed this to the proverbial "dead-cat bounce." He joked that since the new movie "Because of Winn-Dixie" that opened Friday features an eponymous dog, named for the store by the little girl who finds the abandoned mutt there, "maybe we can call it a dead-dog bounce."

Adelphia bonds rise

Elsewhere, there was no immediate explanation seen for Friday's rise in the bonds of Adelphia Communications - but rise they did.

A trader quoted Adelphia's 10¼% notes due 2006 and 10¼% notes due 2011 "moving up a point or two" to 87 bid and 92 bid, respectively.

At another desk, Adelphia's 9 7/8% notes due 2007 were quoted up more than a point on the session, to 87 bid, while the 8 7/8% notes of Adelphia's subsidiary, Century Communications Corp., were seen a quarter-point better, at 102.5 bid.

On Friday, Adelphia said in a filing with the Securities and Exchange Commission that it intends to file an objection to $900 million in claims against the company by Leonard and Claire Tow, the former owners of Century Communications, and since the unit's sale to Adelphia, the company's largest shareholders after the founding Rigas family. The Tows swapped their Century shares to Adelphia in exchange for Adelphia shares when the then-high-flying Adelphia acquired Century in 1999. Since then, its shares have become virtually worthless penny stock, trading currently around 25 cents a share, prompting the Tows' complaint.

Adelphia also plans to file a complaint against Leonard Tow, seeking to recover "unauthorized" transfers of about $21 million. The initial hearing on its claims objection is scheduled for April 8 before the U.S. Bankruptcy Court for the Southern District of New York.

RJ Tower sinks

Among other distressed issues, a trader said that "one bond that keeps going lower" is RJ Tower Corp.'s 12% notes due 2013. He quoted the bankrupt Novi, Mich.-based automotive frame manufacturer's notes having fallen to 61 bid, 62 offered from levels around the mid 60s earlier in the week.

Bankrupt Troy, Mich.-based automotive metal part stamping company Intermet Corp.'s 9¾% notes due 2009 were quoted a point higher, at 67.

ATA Airlines' 13% notes due 2009 and 12 1/8% notes due 2010 were quoted at 42.5 bid, 44.5 offered, up perhaps half a point, following Thursday's big jump of about three points. There was no fresh news seen out on the bankrupt Indianapolis-based air carrier, traders said.

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