Winn-Dixie bonds firmer on additional store sales; auto bank loans steady despite GM loss

By Paul Deckelman and Sara Rosenberg

New York, July 20 - Bonds of Winn-Dixie Stores Inc. were seen higher Wednesday, given a push by the announcement late Tuesday that the bankrupt Jacksonville, Fla.-based supermarket operator had agreed to sell some 102 of its store locations in a court-supervised auction.

In bank debt dealings, distressed loans in the auto sector, such as Collins & Aikman Corp., held surprisingly steady despite General Motors Corp.'s release of lackluster second quarter numbers, traders said.

Winn-Dixie's notes were "trading stronger", a trader said, with the company's 8 7/8% notes due 2008 having moved up to 71.5 bid, 72.5 offered at the opening, up from 70.5 bid, 72.5 offered going home Tuesday. By the time Wednesday's trading ended, those bonds had firmed a bit more, to 72 bid, 74 offered.

At another desk, a trader saw those bonds having improved to 72.5 bid, 74.5 offered from earlier levels at 71 bid, 73 offered.

The bonds rose in apparent reaction to the announcement late Tuesday that the company had managed to sell 102 of its stores at a bankruptcy auction - a gain of 23 stores above the 79 announced earlier in the month.

Winn-Dixie, which filed for Chapter 11 in May after having struggled for over a year with declining sales and intense competition from larger rivals such as Wal-Mart Stores Corp. and another Florida-based supermarketeer, Publix, announced plans to close 326 of its 913 stores, located mostly in the U.S. Southeast, leaving a hard core of 587 stores.

Since Winn-Dixie does not own most of its properties, the assets being sold generally involve leases and equipment.

With more stores being sold, proceeds are also greater - $45.6 million, versus the $38 million initially announced. The Jacksonville bankruptcy court overseeing the company's reorganization is slated to begin hearings to approve the store sales on July 27.

Loans steady despite GM earnings

Elsewhere, even though "GM reported numbers that were not so hot," a bank loan trader said, and "everybody thought it would push everything down," it didn't happen.

"Turns out our stuff more or less is unchanged, even the auto stuff," the trader said.

For example, Collins & Aikman traded in the 84 bid, 86 offered context, unchanged from Tuesday's closing levels, the trader added.

The bankrupt Troy, Mich.-based automotive component maker's 10¾% senior notes due 2011 were likewise little changed, in a 28-29 context.

For the quarter, GM announced a loss of $318 million (56 cents per diluted share), versus net income of $1.4 billion ($2.42 per share) in the year-ago quarter. Revenue was $48.5 billion, compared with $49.3 billion a year ago.

Foamex bonds keep rising

Elsewhere in the automotive area, Foamex International's bonds - which have been bouncing back over the past few sessions after the Linwood, Pa.-based maker of foam rubber products for the automotive and other industries issued a second-quarter earnings warning - kept right on rebounding Wednesday, traders said.

One trader saw its 10¾% notes due 2009 at 88 bid, 90 offered, up a point on the day, while its 9 7/8% notes due 2007 rose to 36 bid from prior levels at 32. He saw the company's 13½% notes slated to come due on Aug. 15 having improved to 47 bid from 42.

A market source at another desk acknowledged that Foamex "moved a couple," with the senior bonds at 88.25 bid, up from 87, its 9 7/8% notes at 36, up from 28.25, and its 13½% notes unchanged at 46.

aaiPharma up again

A trader in distressed bonds saw aaiPharma Inc's 11½% notes due 2010 "continuing to move up," to 92 bid, 94 offered, up from 91 bid, 93 offered on Tuesday and well up from 85 bid, 87 offered late Monday.

The Wilmington, N.C.-based drug company's bonds have been firming smartly for a week, ever since it announced that it had found a buyer for the assets of its pharmaceuticals division.

Northwest lower on strike worries

Northwest Airlines Corp.'s notes were seen "a little lower with a strike looming in August," after federal mediators trying to work out an agreement between the Eagan, Minn.-based Number-Five U.S. air carrier and the Aircraft Mechanics Fraternal Association formally released the two sides from their talks. That starts the clock on a 30-day window that could be followed by a strike. The union said late Tuesday that 92% of its members had voted to give their union leaders the authority to call a strike.

That pushed Northwest's 8 7/8% notes due 2006 down a bit to 63.5 bid, 65.5 offered, while its 7 7/8% notes due 2008 eased to 40 bid, 42 offered. However, another market source, who saw those bonds around the same level, said they were essentially unchanged.

AMR better on profit

Also in the airline group, news that AMR Corp. had posted a second-quarter profit and that Continental Airlines Inc. had cruised to a larger than expected second-quarter earnings gain was seen having pushed AMR's 8% notes due 2012 up to 80 bid, 82 offered from prior levels at 78 bid, 80 offered, "where they had been for the longest time," a trader said. He saw the Fort Worth, Tex.-based carrier's 9% notes due 2016 also two points up, at 79 bid, 81 offered on the news. Continental - whose 8% notes are slated to mature on Dec. 15 - was seen holding steady just a tad below par.

In the second quarter ended June 30, AMR posted a net profit of $58 million (30 cents per fully diluted share) - well up from its year-earlier earnings of $6 million (three cents per share), which included a $31 million benefit from special items. The latest quarter was AMR's first profitable quarter, without the benefit of special items, since the fourth quarter of 2000.

Continental, meantime reported that second-quarter net income hit $100 million ($1.26 per diluted share), although this included a $47 million gain related to the contribution of ExpressJet shares to Continental's defined-benefit pension plan during the quarter. Excluding that unusual gain, Continental recorded net income of $53 million (69 cents per share) - a sharp turnaround from its year-ago loss of $28 million (43 cents per share). The latest per-share earnings easily topped the 20 cents consensus of a number of Wall Street analysts.

While both airlines claimed to have made progress in cutting their costs, they acknowledged that these belt-tightening efforts were dwarfed by continually rising fuel costs. However, both have ample cash cushions to see them over the rough spots (see related article elsewhere in this issue).

Mirant loans move higher

Back among the bank loan players, Mirant Corp.'s 2003 bank debt was slightly stronger during Wednesday's market hours, with levels rising to 84.5 bid, 86 offered, compared to 84 bid, 85 offered during at the close of the previous session, according to a trader.

No particular news was seen pushing the Atlanta-based energy company's bank debt higher.

Atkins bankruptcy talk

Meanwhile, talk around the market is that Atkins Nutritionals Inc. may be filing a pre-packaged bankruptcy plan by the end of this week, according to sources.

The Ronkonkoma, N.Y. diet food company's first-lien bank debt was being quoted right around 60 and the second-lien bank debt was being quoted in the high teens context during Wednesday' session, one source said.

These levels are pretty much unchanged on the day as the paper saw little to no activity during the session, the source added.

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