Winn-Dixie up, then down as Ernesto weakens; Collins &Aikman paper better

By Paul Deckelman and Sara Rosenberg

New York, Aug. 29 - Winn-Dixie Stores Inc.'s bonds - which firmed on Monday - fell back on Tuesday, with a trader broaching the notion that its movements could be related to the weakening of what is now known as Tropical Storm Ernesto.

Elsewhere, Collins & Aikman Corp.'s pro rata bank debt was a touch better on Tuesday - although there was no particular news seen pushing the paper up.

Also in the troubled automotive area, Metaldyne Corp.'s bonds continued to firm, still riding the crest of momentum generated last week on a report that a buyer might soon emerge for the parts company.

And Ford Motor Credit Co.'s bonds were seen benefiting further from investor speculation that parent Ford Motor Co. may consider selling a stake in its valuable finance unit, as a way of raising capital and lowering its borrowing costs by improving Ford Credit's ratings profile.

Winn-Dixie wavers on weather

A market source saw Winn-Dixie's 8 7/8% notes due 2008 finishing the day around 72.75 bid, a little up from its opening levels at 72, but well down from the 74 neighborhood that the bankrupt Jacksonville, Fla.-based supermarket operator's bonds held at Monday's close. That source saw the bonds having risen about 1¼ point on Monday from where they had finished on Friday.

A trader at another desk had also seen the upside movement Monday and, for lack of any other positive news about the company - which is in the process of restructuring and radically downsizing itself by shedding stores in non-core areas - attributed the rise to weekend reports that Ernesto was likely to hit Florida with hurricane-force winds.

"Maybe it's related to the hurricane, with people [running to their local Winn-Dixie store and] stocking up" on canned goods, flashlights and other emergency supplies in anticipation of the storm, he suggested.

But on Tuesday, forecasters downgraded Ernesto back to a tropical storm, noting that when it left Cuba, its maximum sustainable winds were only about 45 mph - well below the 75 mph threshold for consideration as a hurricane.

The weakened storm was expected to make landfall late Tuesday night or early Wednesday, probably sweeping over the Florida Keys and coming ashore somewhere southwest of Miami, according to estimates from the National Hurricane Center.

Collins & Aikman bank debt gains

Elsewhere, Collins & Aikman's pro rata paper closed out the day at 48.5 bid, 50.5 offered, up ½ point from Monday's closing levels of 48 bid, 50 offered, a bank loan trader said, noting that he had seen no particular news on the bankrupt Troy, Mich.-based automotive interior components maker.

A junk bond trader meantime saw "nothing" going on in the company's 10¾% senior notes due 2011, which have most recently been seen trading around 6.5 bid, 7.5 offered - up a little from recent lows around 5 bid, but still down from the levels around 21 at which they began the month, and well down from 47, where they were trading at the beginning of the year.

The bank debt has meantime lost nearly half its value in that same time frame. The bonds and bank paper have fallen recently on investor pessimism that any kind of a real bid will emerge anytime soon for the company's domestic operations - particularly after a plastics industry trade publication reported last week that Wilbur L. Ross - the billionaire financier who had been widely mentioned as the candidate most likely to come along and scoop up Collins & Aikman - no longer sees buying Collins & Aikman's operations in North America as the "lynchpin" of his strategy of assembling a super-company out of the ruins of the hard-hit auto supply sector.

Metaldyne move continues

Elsewhere in the automotive arena, Metaldyne Corp. - whose 11% subordinated notes due 2012 have moved up over the past few sessions to around the 80 bid level from last week's levels in the mid to upper 70s - continued to firm Tuesday, falling back to 77 at the opening from Monday's close around 80, but then rebounding to finish at 80.75.

The Plymouth, Mich.-based maker of metal parts for Ford and the other major automakers has been firming ever since a report last week on DebtWire indicating that a potential buyer might soon emerge, although there has been no follow up seen to that initial report, people in the market said.

Ford Credit firmer

Ford Credit's 7% notes due 2013 were seen having moved up to a closing level around 92 bid from Monday's finish at 91, although at one point those bonds got to be as good as a 94 context before backing off.

However, while the activity level was seen as fairly busy for a late-summer day, volume was off from the levels seen over the previous several sessions.

And another trader didn't even see a gain, quoting the Ford Credit bonds actually ¼ point lower at 92.5 bid, 93 offered, while the parent company's 7.45% notes due 2031 were also ¼ point down, he said, at 78 bid, 78.5 offered.

The Ford bonds, and those of its credit arm, had firmed smartly on Friday and again on Monday on continued market buzz that the embattled Number-Two domestic carmaker might follow the recent lead of arch-rival General Motors Corp. and sell a sizable stake in the credit unit. GM sold 51% of its General Motors Acceptance Corp. financing unit to a coalition of private-equity investors this past spring for $14 billion.

The Detroit News reported over the weekend that Ford might consider selling "a significant stake" in the Ford Credit arm, quoting an analyst as saying that such a sale could bring $6 billion into the carmaker's coffers - a welcome tonic for Ford, which has already lost $1.4 billion in the first half of this year alone, as sales of its popular pickup trucks and sport-utility vehicles have tumbled.

Besides giving Ford more liquidity, such a sale, should it occur, could lower the car company's bloated cost of borrowing money, since the presence of a strong financial buyer, particularly if it has a controlling interest, might convince the ratings agencies to bring Ford Credit back out of junk territory. It is currently rated Ba3 by Moody's, B+ by S&P and BB- by Fitch.

Speculation that Ford might be willing to shop a stake in Ford Credit - something it previously said it would not want to do - grew with the Friday resignation of former Treasury secretary Robert Rubin from Ford's board of directors. Rubin stepped down to avoid any conflicts of interest, since he is also a top executive and board member of Citigroup Inc., Ford's key financial advisor - also mentioned in the media as a potential buyer of the Ford Credit stake - and his departure would seem to clear the way for greater involvement by Citigroup in helping Ford to restructure itself.

Besides a possible sale of part of Ford Credit, other potential transactions being bandied about in the media include a sale of the unprofitable Jaguar nameplate and other luxury brands, possibly to a group headed by ex-Ford CEO Jacques Nasser; Ford's possible teaming up with other carmakers in an alliance, similar to the one that GM is negotiating with Renault and Nissan; or the founding Ford family taking the company private, as it was until 1956, which would give chairman William Clay Ford Jr. and his brain trust more flexibility to try to turn the company around. Such a going-private deal might cost at least $14 billion.

In other automotive names, GM's 8 3/8% notes due 2033 were seen unchanged at 83 bid, 83.75 offered, while GMAC's 8% notes due 2031 were ¼ point lower at par bid, 100.5 offered.

Dura Automotive Systems Inc.'s 9% subordinated notes due 2009 were unchanged at 15.5 bid, 16.5 offered, while the Rochester Hills, Mich.-based auto parts company's 8 3/8% senior notes due 2011

were seen up 3/8 point at 72.75 bid, 73.75 offered on "not a lot of quotes."

He also saw Van Buren Township, Mich.-based parts maker Visteon Corp. - a former Ford unit - unchanged across the board, its 7% notes due 2014 at 88 bid, 88.5 offered, and its 8¼% notes due 2010 at 97 bid, 97.5 offered.

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