Winn-Dixie bonds bounce; Owens Corning debt slips

By Paul Deckelman and Sara Rosenberg

New York, Feb. 4 - Bonds of Winn-Dixie Stores Inc. were heard to be on the rebound Wednesday after three straight sessions of decline which had seen the Jacksonville, Fla.-based supermarket operator's notes fall some 20 points in response to bad earnings figures.

In bank debt trading meanwhile, Owens Corning's paper lost several points in response to controversy surrounding a federal judge hearing several major asbestos-related bankruptcy cases, including that of the Toledo-based insulation maker, which was driven into Chapter 11 in 2000 by a flood of asbestos-related claims and which has been there ever since.

Owens Corning's bank debt was heard lower by about two points on Wednesday at 72.5 bid, 73.5 offered, according to a trader who said that the drop was in reaction to "news on the judge".

Earlier this week, the company's creditors learned that Judge Alfred Wolin refused to recuse himself from asbestos-related bankruptcy cases, including Owens Corning's; the judge said in a court document that "allegations of the appearance of impropriety when measured against the record do not merit recusal."

Wolin has been hearing Owens-Corning's case, as well as those of Armstrong World Industries, USG Corp., Federal-Mogul Corp. and W.R. Grace, all of whom fled under the Chapter 11 umbrella in response to numerous claims for asbestos-related illnesses allegedly brought on by the companies' industrial use of asbestos - now regarded as a carcinogen - in years gone by.

Kensington International Ltd. and Springfield Associates LLC (two creditors), along with USG, had filed motions asking Wolin to turn the case over to another judge, on the belief that there would not be a fair hearing because the judge and his advisors held discussions outside the courtroom with people who were and were not involved in the case.

The U.S. Court of Appeals for the Third Circuit left the recusal decision with Wolin, who chose not to recuse himself.

The judge wrote that "through the appointment of its advisers, the court surrounded itself with persons who possessed a wealth of knowledge relevant to the history of asbestos litigation and its case management. They were a resource of impeccable credentials and even as the court writes this opinion, their expertise remains unchallenged."

Winn-Dixie bounces around, ends higher

Elsewhere, Winn-Dixie's 8 7/8% notes due 2008 - which nosedived 15 points Friday on poor quarterly results from levels above par, down into the 80s, and which then continued to retreat over the following two sessions, on Monday and Tuesday, were doing a lot of bouncing around Wednesday, a trader in distressed issues said, finally coming to rest around 83.5 bid, 85.5 offered - well up from Tuesday's closing levels in an 80.5-81.5 context.

"There was a lot of volatility in bouncing back and forth between the low 80s and the mid-high-80s," he added.

Another trader, who pegged the bonds going home at 83 bid, 85 offered, noted that while that was "up five points from the lowest bid" in the upper 70s seen on Tuesday, "it was up 2½ points from the real bid, put it that way."

"There was some short-covering," he said, "some serious short- covering. When that finishes up, we'll see what the real players are going to do."

He noted that a week ago, before the unexpected quarterly loss was announced, the company's bonds were hovering at levels as high as "104 bid, 105, and they couldn't get enough of it. What did they think, they [the company] is going to take this stuff out?"

Doman better, Air Canada weaker

Doman Industries Ltd.'s 8¾% notes due 2004 were seen better by about three points on the session, to around the 29-30 level, although traders said they saw no fresh news out on the Canadian forest products firm, currently reorganizing under that country's insolvency laws.

Also north of the border, a trader said that Air Canada's bonds were "a little weaker, with the restructuring airline's dollar-denominated bonds dipping to offered levels around 34-35 and its euro-denominated bonds offered around 30, "so that's down a couple-three points over the last several days."

And he saw Adelphia Communications Corp.'s bonds "a little stronger," citing the influence of CNBC report Tuesday which speculated that once the Denver-based cable operator emerges from bankruptcy - which could take place this spring - it will likely be an attractive takeover target for larger cable players such as industry leader Comcast Corp. or Cox Communications.

That's "one of the reasons the bonds have come back as far as they have," he said, quoting Adelphia's 10 7/8% notes due 2010 as having been boosted to 103 bid and the 10¼% notes due 2011 to 106 bid.

Adelphia's Century revolver traded on Wednesday around 97 to 97.5, according to a trader, down from previous levels of 97.5 bid, 98 offered. The cabler's paper is said to be dipping on market technicals, the trader added.

Calpine steady at lower level

Also among the bank debt dealers, Calpine Corp.'s Calpine Construction Finance Co. II LLC revolver remained at 98.5 bid, 99 offered, the level it had moved down to late last week, despite solid news from the company that a refinancing plan was in action.

The San Jose, Calif.-based independent power producer's paper was unable to reach the usual par levels that a refinancing announcement tends to incite, as investors remained cautious on the company's ability to complete its proposed transaction, according to a trader.

"The market is very sloppy. What happens if they don't get it done? Then where does it trade to? You'll definitely lose more than one point," the trader said.

On Wednesday morning, Calpine revealed that its wholly owned subsidiary, Calpine Generating Co. LLC (previously CCFC II) would be coming to market with approximately $1.3 billion of non-recourse first priority secured institutional term loans and approximately $1 billion non-recourse second priority secured notes.

It said the term loans and the bank debt would be used to refinance amounts outstanding under the $2.5 billion CCFC II credit facility that matures in November. Currently there is about $2.3 billion in outstanding debt under the CCFC II facility including letters of credit.

Allegheny refinancing seen

However, Allegheny Energy Inc.'s bank debt did wrap itself around the par area as the company filed a U-1/A with the Securities and Exchange Commission that essentially convinced investors that a refinancing of existing bank debt will occur soon, according to a trader.

The Hagerstown, Md. energy company's paper was quoted at 99 7/8 bid, par 1/8 offered.

In the filing, the company revealed that it was looking to issue up to $1.6 billion of debt so as to repay and refinance all of the bank debt that was restructured in February 2003.

And, late in the day, it was announced that SEC approval was granted on the proposed debt issuances (see story elsewhere in this issue).

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