Winn-Dixie firms as lenders double credit line; Pegasus continues gains

By Paul Deckelman and Sara Rosenberg

New York, June 30 - Winn-Dixie Stores Inc. bonds were heard to have firmed smartly on Wednesday, up between two and three points, as the Jacksonville, Fla.-based supermarket chain operator announced that its senior lenders had agreed to increase its revolving credit line to $600 million from $300 million previously.

Elsewhere, Pegasus Satellite & Communications Inc.'s bonds continued to take flight, in line with a strong jump in the shares of the bankrupt Bala Cynwyd, Pa.-based satellite television programming distributor's not-bankrupt corporate parent. There was no fresh news out on either Pegasus Satellite's ongoing restructuring or its also ongoing legal battle with corporate nemesis DirecTV Group Inc.

On the bank debt front, Leap Wireless Inc. paper was essentially little changed as it settled in at levels slightly below its recent highs but still well up from where it had been at the beginning of June.

Winn-Dixie "was up big," a trader said, quoting its 8 7/8% notes due 2008 as having firmed to 95.5 bid, 96 offered, up about 2½ points.

And he saw the company's real-estate secured passthrough certificates due 2026 "hot as a pistol," with "everybody scrambling" to get some of the bonds. He quoted the 8.181% certificates at 81 bid, 82, "if the offering levels are real" and its 7.803% certificates at 84.5 bid, 85.5 offered, both up at least two points on the session.

Another trader saw the 8 7/8% notes at 94.5 bid, 95.5 offered, up from around 92 on the financing news.

"I would think they are going to use some of the money to spruce up some of the stores," one of the goals the company outlined on a conference call several weeks ago, "and restructure" its operations, the trader said.

Winn-Dixie said that Wachovia Capital Markets LLC was the sole lead arranger on the increased credit revolver, which now grows to $600 million from $300 million. It said its amended and restated senior secured credit facilities will consist of a $400 million three-year revolving credit facility and a $200 million three-year standby letter of credit facility.

The facilities are asset-based, with a borrowing base comprised of an agreed percentage of the inventory balance, pharmacy receivables, pharmacy scripts and certain real estate, Winn-Dixie said. Covenants in the facility relate to minimum EBITDA and maximum capital expenditures that will not be tested as long as the company is maintaining a minimum excess availability. Winn-Dixie cannot allow adjusted excess availability to fall below $75 million at any time.

The company's CEO, Frank Lazaran, said that the extra borrowing power "will support the ongoing execution of our strategic initiatives designed to improve Winn-Dixie's competitive positioning.

Pegasus bonds rising

Elsewhere, Pegasus bonds continued to push their way up from their recent lows for a second straight session, a trader said, quoting the company's senior notes, like its 9 5/8% and 12 3/8% notes, each due 2006 at 48.5 bid, up from 46 on Wednesday, while its 12½% notes due 2007 were up to 49.5 bid from 47 earlier.

Even the battered 13½% notes due 2007 were at 10, up a point, and its 12¾% notes due 2007 were up two points to 5 bid,

The shares of parent company Pegasus Communications Corp, jumped $4.62 (23.29%) to $24.46 in busy Nasdaq trading of 452,000, about double the usual.

Pegasus Media & Communications Inc.'s term loan D and initial term loan meantime held steady Wednesday, with the D tranche quoted at 98.25 bid, 99 offered and the initial term loan tranche quoted at 96.5 bid, 97.5 offered, according to a trader.

Pegasus - for now - distributes DirecTV service to about 1.1 million mostly rural customers, but the two companies have been feuding for some time over just how much those customers should actually be worth to DirecTV.

After months of legal wrangling, DirecTV and the National Rural Telecommunication Cooperative - a TV programming distribution industry group of which Pegasus was the largest member - agreed to end the exclusive right of NRTC members like Pegasus to sell DirecTV in their territories, effective Aug. 31.

While DirecTV said that non-Pegasus members could arrange to continue to distribute its programming in their service areas on a non-exclusive basis, it gave Pegasus no such option, instead making a take-it-or-leave it offer of $675 per customer, which Pegasus rejected as grossly inadequate.

Pegasus alleged that DirecTV and NRTC were conspiring to destroy its business, and it filed for bankruptcy protection in Portland, Me. on June 2.

The court recently refused to grant Pegasus' motion for a court order to stop DirecTV from trying to market its services to new customers in Pegasus' formerly "exclusive" territory.

But while Pegasus bonds are worth less than half of their par value, its stock keeps climbing. Equity investors apparently feel that Pegasus Communications won't be sucked into the bankruptcy mess and will retain its assets. They have also been heartened by active recent buying by a hedge fund, Peninsula Capital.

Leap holds steady

Back among bank debt investors, Leap Wireless' paper basically continued to stay at its newly found comfort level, with some quoting the paper at a wide 124.5 bid, 126.5 offered compared to levels throughout the first half of this week of 124 bid, 125 offered, according to a trader.

However, there was very little activity in the name and in the distressed bank loan market in general as the long holiday weekend is fast approaching, the trader added.

Leap has spent last week basically retreating from its recent highs and trading erratically, apparently pushed lower by a bearish research report on the San Diego-based telecommunications company from Imperial Capital.

Also affecting the paper was technical pressure as the bank debt started to feel a bit heavy and was said to be correcting itself.

Before being brought lower by the Imperial Capital research report, which was described as "not too favorable," Leap's bank debt had recently jumped as high as 126 bid - well up from levels around 110 bid seen earlier in the month.

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