Winn-Dixie bonds up as Chapter 11 emergence seen; Calpine bank debt gains on non-acceleration pact

By Paul Deckelman and Sara Rosenberg

New York, Dec. 9 - Winn Dixie Stores Inc.'s bonds were up smartly on Friday, traders said, as the bankrupt Jacksonville, Fla.-based supermarket chain operator projected that it will emerge from bankruptcy in about six months, which overshadowed fiscal first-quarter results showing lower sales and wider losses than the year-ago comparative figures.

Elsewhere, Calpine Corp.'s second-lien bank debt reversed direction on Friday, moving up by about a point or so in reaction to the news that the trustee for its second-lien notes had agreed not accelerate that debt as a means of forcing the troubled San Jose, Calif. Power generating company to immediately pay back improperly spent asset-sale proceeds.

Winn-Dixie's 8 7/8% notes due 2008 were seen by a trader in distressed issues to have moved up to 76 bid, 78 offered from Thursday's closing levels at 71 bid, 73 offered.

Another trader said he had seen "small trades in the 70s, small offerings in the low 80s, but not a lot of activity." He had Winn-Dixie's odd lots "all over the place," with round lots at the 78 bid, 79 level "on decent size."

That jump followed the company's disclosure in a Securities and Exchange Commission filing as the market was closing on Thursday that it expects to emerge from Chapter 11 in June of next year. The company that emerges will be a much downsized version of its former self, with some 575 stores - about one-third of its pre-bankruptcy size - in its home turf of Florida, in neighboring Alabama and Georgia, and in Louisiana, Mississippi and the Bahamas.

The company will employ about 58,00 people when its restructuring is completed, well down from over 100,000 when it filed for Chapter 11 in mid-February.

The venerable Winn-Dixie - for many years the dominant supermarket chain across the southeastern United States - was forced into its restructuring after several years of sharply declining sales due to aggressive moves into its traditional territories by rival supermarket operators such as Publix and, especially, Wal-Mart Stores' rollout of its "superstore" format, including supermarket-like sections in its discount stores that undercut Winn-Dixie's prices. Its efforts to remake itself as "your neighborhood store" couldn't compete and the company was forced to file after vendors stringently tightened their terms.

Winn-Dixie - which is in the process of closing and attempting to sell stores which are not part of its core - said in the filing that 81 stores already have been sold, generating proceeds of about $40.8 million. Another 245 stores were closed at the end of November, as well as three distribution centers and two dairies.

The news that there is a light at the end of the tunnel and that the company will emerge from bankruptcy in June, after 2½ years of in- and out-of court restructurings, overshadowed the separately announced fiscal first-quarter numbers, which showed the seventh loss in the last nine quarters, as well as a 3.5% fall off in sales from year-earlier levels.

However, there was some good news in the sales decline; Winn-Dixie said same-store sales [sales at stores open at least a year, a key economic metric in the retailing industry] were down 2.9% in the quarter - a sizable sequential improvement from the 4.5% year-over-year same-store sales decline seen in the 2005 fiscal third and fourth quarters.

Winn-Dixie's over-the-counter-traded shares jumped 27 cents (47.75%) to 82 cents. Volume of 3.1 million shares was over six times the norm.

Calpine 2nd lien loans rise

Calpine's second-lien bank debt was quoted at 75 bid, 77 offered, up from Thursday's closing level of 74 bid, 75 offered, a bank loan trader said.

The company's junk bonds were, by way of contrast, seen little changed on the session, with a trader quoting its 8½% notes due 2011 at 19 bid, its 8½% notes due 2008 at 24 bid, 25 offered, and its 7¾% notes due 2009 at 31 bid, 33 offered, "all pretty much where they were."

Another trader saw those '08 bonds at 24 bid, 24.5 offered and saw its 10½% notes due 2006 at 33.5 bid, 35 offered, both "pretty much where they were," he said.

Among the company's secured bonds, he said, its 9 5/8% notes due 2014 were "unchanged to just a little wider," at 102.25, He saw Calpine's 9 7/8% notes due 2011 actually up a point at 75.5 bid, 76.5 offered.

Calpine's second-lien bank debt had been in somewhat of a freefall since around mid-week after news surfaced that Wilmington Trust Co., the trustee for its secured bondholders, notified the company that it could declare Calpine in default on $3 billion in second-lien secured debt unless it immediately repaid the approximately $312 million that a judge said had been improperly spent on asset purchases, to the Bank of New York collateral account.

But, under the recent court ruling, Calpine had been given until Jan. 22 to repay the funds.

Calpine had filed a temporary restraining order aimed at keeping the bond trustees from accelerating the repayment of the company's second-lien notes on or before Jan. 22. However, news emerged late Thursday that this restraining order was withdrawn because an agreement was reached with the second-lien note trustees, who will hold off on accelerating the debt until after Jan. 22.

At the start of the week, before the legal wrangling with bondholders had gained so much momentum, Calpine's second-lien bank debt was being quoted in the 77.5 bid, 80 offered type of range.

By comparison, the bank debt was being quoted at 76 bid, 77 offered at the close Wednesday and at 78 bid on Thursday.

Refco rebounds

Apart from Calpine, a trader said that Refco Inc.'s 8% notes due 2012 bounced after having fallen sharply Thursday, when the bankrupt New York-based financial services company was reported to have admitted that some time after its Chapter 11 filing it transferred securities from customer accounts in one subsidiary to another and later sold most of the securities involved - breaking an agreement to bar such transactions.

He saw those bonds at 75 bid, 77 offered, well up from 71 bid, 73 offered.

Allied continues gains

And Allied Holdings Inc.'s 8 5/8% notes due 2007 moved as high as 75 bid, 77 offered, a trader said, after having been quoted as low as 57 bid, 59 offered.

"I don't know what it means or why," he said, "but the bonds were up."

The bonds "were moving up all week," another trader said, tracking their rise to 75 bid, 76 offered from 70 bid, 71 offered on Thursday and from 65 bid, 66 offered a week earlier, "up 10 points on the week."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.