Levi bonds continue rise; Weirton slides on choice of asset buyer

By Paul Deckelman and Sara Rosenberg

New York, April 16 - Levi Strauss & Co. bonds were seen continuing to trade higher Friday, capping a week in which the San Francisco-based blue jeans maker's notes firmed smartly from prior lows, pushed up by a combination of market rumors and short-covering.

Meantime, Weirton Steel Corp. bonds were headed the other way, down sharply Friday amid apparent investor disappointment with the results of the bankrupt West Virginia steelmaker's auction of its assets - a contest won by financier Wilbur Ross's International Steel Group Inc., much to the chagrin of Weirton's bondholders.

Trading in distressed-company bank debt was seen as very quiet, market participants said.

Levi bonds "continue stronger," a trader said, "and I don't know why. Do you?" He added that "I just can't believe these levels."

He quoted the company's 11 5/8% notes due 2008 as having traded as high as 88.5 bid during the session before ending at 88 bid, 90 offered, up another point, while Levi's 12¼% notes due 2012 were at 87.5 bid, also firmer.

The Levi bonds have recently firmed on rumors the company might be bought or might sell off one of its product lines, such as the popular Dockers line of khaki clothing. Short-covering was also seen as a factor.

The rumor mill was also busy Friday regarding Winn-Dixie Stores Inc., pushing the Jacksonville, Fla.-based supermarket operator's 8 7/8% notes up to 91.5 bid, a gain of a point-and-a-half on the session.

The trader cited renewed market scuttlebutt that the founding Davis family, who own 40% of the company's shares, may decide to take the company private, rather than enter into a costly restructuring likely to wipe out the value of their stake. Those rumors are not new - but they continue to gain legs every once and a while. With Winn-Dixie also short-covering is seen as a factor.

Weirton Steel drops

Weirton Steel "definitely was lower," a trader in distressed bonds said, quoting its notes as having fallen to a wide 20 bid, 30 offered - although those levels don't tell half the story.

"We saw bids as low as 10 and offers as high as 40, before the bonds finally settled in at the current levels," in response to the outcome of the auction.

Another trader saw Weirton's notes having fallen to 28 bid, 32 offered from prior levels around 43 bid, 45 offered.

'"I guess that their hopes that a white knight would come along with a better deal just didn't happen."

Weirton said late Thursday that it would recommend to the U.S. Bankruptcy Court in Wheeling, W.Va. on Tuesday, the next scheduled hearing, that the court approve the sale of Weirton's assets to International Steel Group Inc., although several conditions must still be met for the sale to go through.

In February, International Steel had bid $158 million for most of Weirton's assets, assumption of about $97 million of the company's debt.

That left many creditors feeling that they would get short shrift is Ross were allowed to buy Wheeling's assets and combine them with the assets of other bankrupt steelers he has recently acquired at fire-sale prices, including the former Bethlehem Steel Corp., LTV Corp. and Acme Metal.

A bondholder-led group made a counter-offer of $138.74 million and a credit bid of $25.5 million, plus assumption of $97 million in liabilities, the group said.

Weirton did not disclose the actual results of the auction beyond its board of directors' choice.

FiberMark, RCN lower

Another bankrupt name trading around on Friday was FiberMark Inc., "and no one can figure out what is going on" right now with the Brattleboro, Vt. -based maker of industrial-use fiber products.

He quoted the company's 10¾% notes due 2011 and 9 3/8% notes due 2006 "down another point," to 52.5 bid.

The trader did not see much activity in the bonds of RCN Corp., which announced that it would defer another coupon, this time the scheduled April 15 interest payment of $8 million on its 10% notes due 2007 and the $17.6 million interest payment on its 11¼% notes, also due in 2007.

RCN, a Princeton, N.J.-based telecommunications and broadband operator, invoked the standard 30-day grace period, while it tried to map out its next move. The company has been in talks with its lenders on putting together a voluntary restructuring under Chapter 11 and said those talks continue.

The company' bonds, meantime "trade like they're already in bankruptcy," he said. He quoted RCN paper at 47.75 bid, 48.75 offered, all down one or two points on the session.

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