Winn-Dixie better on private equity search news; Adelphia loans easier

By Paul Deckelman and Sara Rosenberg

New York, March 23 - Winn-Dixie Stores Inc. bonds and shares were quoted higher on a news report that the troubled Jacksonville, Fla.-based supermarket chain is trying to get one or more private equity investors to buy into the company.

In the market for distressed bank debt, the loans of Adelphia Communications Corp. subsidiary Century Communications Corp. felt a little bit weaker despite the lack of trading activity in the name, traders said, with market technicals cited as the primary reason behind the drop in levels since no fresh news emerged recently about the company and its reorganization process.

The New Century bank paper was being quoted at 92.5 bid, 93.5 offered, down about a point on the day, while the Old Century paper was quoted at 94.5 bid, 95.5 offered, down about a half a point to three-quarters of a point on the day, a trader said.

However, the Century revolver managed to walk away unscathed with quotes of 92 bid, 93 offered, "more or less" unchanged on the day, the trader added, although he noted that in general, Tuesday's distressed bank loan market was relatively quiet, with "a lot of accounts probably waiting until the end of the quarter."

On the bond side of the ledger, Century's 8 7/8% notes due 2007 were seen down about at point at 104.5 bid.

Adelphia, a Greenwood Village, Colo.-based cable company, sought protection from its junk bond holders and other creditors in 2002 after revelations of extensive off-balance sheet borrowing by company founder and ousted chairman John J. Rigas and members of his family who held senior executive positions. Those revelations led to the indictment of Rigas and several family members on charges they looted the company of as much as several billion dollars in order to fund investments in non-Adelphia businesses.

That fraud trial is currently going on in federal court in New York,

Tuesday's Wall Street Journal reported that Adelphia's former vice president of financial operations, LeMoyne Zacherl, said he warned founder the elder Rigas and his son Timothy, then the company's chief financial officer, that it was improper to have the cable operator pay their personal expenses.

The elder Rigas, his sons Timothy and Michael, and another former company executive, have all pled not guilty to charges of securities, wire and banking fraud, and of having made false statements to the Securities and Exchange Commission.

Winn-Dixie 2-3 points better

Elsewhere, Winn-Dixie's 8 7/8% notes due 2008 were seen having pushed as high as 89.5 bid during the session, up from prior levels about two or three points lower.

Its 7.03% bonds due 2027 were quoted at 83.5 bid, 84.5 offered, up about two points from their recent levels, and its 8.181% subordinated bonds due 2024 were three points above recent levels, ending at 78.5 bid, 79.5 offered.

On the equity side of the ledger, Winn-Dixie's New York Stock Exchange-traded shares jumped 73 cents (9.93%) in Tuesday dealings to $8.08. Volume was 9.6 million shares, more than four times the norm.

The bonds and the shares were said to have caught a bid after thedeal.com reported that the company "has been shopping itself to private equity investors because the family that owns the supermarket chain fears losing its fortune in a bankruptcy filing, according to investment bankers."

Winn-Dixie has been in trouble ever since late January, when it stunned investors and analysts by reporting a surprise quarterly loss and a sales decline, as the company is being battered by competition from larger, more financially secure rivals, particularly Wal-Mart Corp., which has recently expanded into a number of markets in Florida and elsewhere in the Southeast historically served by Winn-Dixie.

Those development caused both its bonds and its shares to cascade downward and even sparked talk that a bankruptcy filing might be the only way out, although Tuesday's story quotes sources downplaying that possibility; they assert that the founding Davis family, 40% owners of the Southeast regional supermarket operator, would not want to see its investment devalued by a bankruptcy filing, and is instead is looking for a financial partner, who would likely take a minority stake so the Davises could retain control of the company.

However, the story also quoted an unidentified banker as saying alternatively that national supermarket operator Albertsons' Inc. would be a logical buyer for Winn-Dixie, and quoted a Winn-Dixie spokesperson as declining comment.

The story went on to note that the company's recent change in chief financial officers could be a harbinger that an attempt to sell part or all of the company might be in the works, since Bennett Nussbaum, who abruptly replaced Richard Cook as CFO on March 8, had presided over two earlier buyouts of retailers at which he was serving as CFO - the acquisition of Burger King Corp. by the Texas Pacific Group, Goldman Sachs Private Equity and Bain Capital, and the buyout of Kinko's Inc. by the New York private equity firm Clayton, Dubilier & Rice Inc.

Oakwood notes up

Oakwood Homes Corp.'s 8 1/8% notes due 2009 and 7 7/8% notes that were to have come due on March 1, were heard to have bounced up to levels around 48 bid, 51 offered on news that five of the Greensboro, N.C.-based homebuilder's nine classes of creditors had approved the company's reorganization plan, which envisions the sale of Oakwood to Clayton Homes Inc., controlled by billionaire investor Warren E. Buffett's Berkshire Hathaway Inc.

The Oakwood bonds had recently fallen as low as 40 bid, 41 offered from prior levels around 46 bid, 47 offered, but moved back up, a trader said "now that it really looks like Buffett's going to buy them." The bankruptcy court overseeing Oakwood's reorganization is expected to hold a hearing before the end of the month to consider confirming the plan.

Troubled textile maker Dan River Inc.'s 12¾% senior notes due 2009 were quoted at 25 bid, 26 offered, and trading flat, or without accrued interest, a trader said, noting that on Monday, the bonds had been seen at 20 bid, with interest.

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