Winn-Dixie steadies at lower levels as Jeanne passes; Interstate Bakeries debt firmer

By Paul Deckelman and Sara Rosenberg

New York, Sept. 27 - Winn-Dixie Stores Inc. bonds - which had fallen sharply late week in the run up to Hurricane Jeanne's weekend visit to the Jacksonville, Fla.-based supermarket operators' home territory - was seen steadying Monday - albeit at lower levels - with the hurricane how having passed through Florida on its way elsewhere.

In bank debt trading, Interstate Bakeries Corp.'s bank debt headed higher by about half a point on Monday in light trading, with the company's term loan quoted around 97 and the revolver quoted around the mid-98s, according to a trader.

That paper has been steadily improving since mid-last week, when the company announced that it had filed for Chapter 11 in the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City, mainly because of liquidity issues resulting from declining sales, a high fixed-cost structure, excess industry capacity, rising employee healthcare and pension costs, and higher costs for ingredients and energy.

A day after filing, the Kansas City, Mo. wholesale baker and distributor of fresh baked bread and sweet goods - best known for such famous consumer brands as Wonder Bread, Hostess, Dolly Madison and Drake's - received interim court approval permitting its $200 million debtor-in-possession financing facility from JPMorgan Chase Bank, and permitting it immediate access up to $50 million to continue operations, pay employees, and purchase goods and services going forward during the restructuring period.

Back among the bond traders, Winn-Dixie "bounced about half a point, said a trader, who added that there was "not much activity" - either in the bonds of that specific beleaguered credit, or in the high yield market in general.

Bonds, he said, took their cue from the equity market, and "the equity market was weak, with oil moving up 65 cents a barrel [to around the $50 per barrel neighborhood] not helping matters much."

"Things were just quiet, with not a lot of business. The market started with a bang - but ended with a whimper."

He saw the Winn-Dixie 8 7/8% notes due 2008 as having firmed slightly to 82.5 - up half a point on the session, but well down from levels around 85 bid, 87 offered that those bonds had held on Thursday, before Friday's pronounced hurricane-influenced slide.

Winn-Dixie, said another trader, "is still down there at lower levels," quoting the bonds at 81 bid, 83 offered.

"They didn't go anywhere," once the hurricane danger to Florida - home to at least half of the company's roughly 1,000 stores - had passed. "They didn't rally."

Winn-Dixie - which was already struggling mightily even before the not-so-Sunshine state was barraged by four hurricanes in quick succession. Charley, Frances, Ivan and finally Jeanne caused billions of dollars of damage throughout the state, cutting into the sale of retailers such as Winn-Dixie - which, like other supermarket operators, also faced the double jeopardy of losses connected with spoiled meat, dairy, fish and produce at stores located in areas where electric power lines were destroyed by the quartet of raging storms. Hurricane Charley alone was estimated to have caused Winn-Dixie as much as $10 million in lost business and other losses.

Delta steady

Elsewhere, traders said there was not much going on in the volatile bonds of the sagging airline industry, roiled by ever-rising fuel costs as well as high labor costs, particularly Delta Air Lines Inc. A trader quoted the Atlanta-based air carrier's benchmark 7.70% notes due 2005 "still" at 47 bid, 49 offered, while its 8.30% bonds due 2029 continued to languish around 24 bid, 26 offered.

Northwest Airlines Corp.'s 7 7/8% notes due 2008 were seen down a point at 69.5 bid.

The troubled industry got further bad news Monday when J.P. Morgan Securities Inc. cut its ratings on the stock of AirTran Holdings Inc., JetBlue Airways Corp. and Frontier Airlines Inc. to "underweight" from "neutral." The low-cost carriers had heretofore been seen as less affected by the problems of the airline industry than their old-line traditional rivals like Delta, Northwest, American Airlines, Continental Airlines, the bankrupt United Airlines and the once-and-again bankrupt US Air Group.

The brokerage house cited its concerns over sharply higher gas prices and a worsening landscape for carriers heading into the end of the year.

J.P. Morgan airline equity analyst Jamie Baker said that while higher oil prices, service disruptions from recent hurricanes and overall industry weakness have affected both low-cost and major airlines, network carriers recently have slowed their declines and are taking "significant" steps to improve costs in fighting back against discount players.

Intermet's fall ends

Intermet Corp. - whose 9¾% notes due 2009 were crashing all of last week, falling 40 points to the lower 30s - seemed to have stopped their slide, although one market source quoted them down a point, at 35 bid. The bonds fell after the Troy, Mich.-based automotive components maker warned that it would sustain losses of between $19 million and $24 million in the quarter, putting the company in violation of its credit facility covenants and necessitating a waiver from its lenders.

A trader saw Adelphia Communications Corp. bonds down about a point across the board, with the bankrupt Greenwood Village, Colo.-based cable operator's 10¼% notes due 2008 at 86 bid, 88 offered; its 10¼% notes due 2011 at 90 bid, 92 offered, and its busted convertibles at 28 bid, 29 offered.

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