Southern food and drug retailer Winn-Dixie Stores Inc., and 23 of its U.S. subsidiaries filed for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York. Subsidiaries include Winn-Dixie Marketplace, City Markets, and SaveRite, as well as gas stations and liquor stores
Two weeks after announcing a year-long pattern of increased losses and declining revenue, the Jacksonville, Fla.-based chain voluntarily entered Chapter 11, cited reduced liquidity and credit downgrades from ratings agencies, followed by a tightening of trade credit by its vendors. The tightening further reduced cash availability.
The company disclosed sales of $5.41 billion on a net loss of $552.8 million for the first six months of this fiscal year, according to the Associated Press. In comparison, the company reported $5.65 billion in sales on a net loss of $78.3 million for the same period ending in 2004,.
In its most recent 10-Q, Winn-Dixie reported total assets of $2.2 billion and total liabilities of $1.9 billion, on a consolidated basis, as of January 12, 2005. Officials noted that the company’s Bahamas-based subsidiary and WIN General Insurance Inc., Winn-Dixie’s captive insurance company, were not included in the bankruptcy filing.
Officials reported that all 920 Winn-Dixie stores in eight states and the Bahamas are open and serving customers. To supplement operating cash flow during the reorganization, Winn-Dixie secured an $800 million debtor-in-possession (DIP) credit facility from Wachovia Bank, N.A. The DIP, which is subject to court approval, replaces the company’s existing $600 million credit line.
Peter Lynch, the company’s president and chief executive officer, said he is convinced that the Chapter 11 process will sustain a company turnaround. He added that he intends to use the reorganization to achieve significant cost reductions, improve the merchandising and customer service, and generate “a sense of excitement in the stores.”
As part of the reorganization, the company plans to sell non-core manufacturing assets and cut expenses by reworking its real-estate portfolio. Winn-Dixie is also seeking Bankruptcy Court approval to terminate real-estate leases on 150 stores and two warehouses, all of which had previously been shuttered. Total savings from the terminated leases could add up to $60-million, according to a company press release.
Employees are being paid “in the usual manner” and their health and welfare benefits are expected to continue without disruption, according to the release. Winn-Dixie’s 401(k) profit sharing plan is maintained independently of the company and protected under federal law.
In other bankruptcy news, officials at Spiegel Inc. said the company plans to emerge from Chapter 11 and reorganize around its Eddie Bauer division, thereby reestablishing itself as Eddie Bauer Holdings Inc.
The restructuring plan, filed with the U.S. Bankruptcy Court of the Southern District of New York on Friday, allows Spiegel’s unsecured creditors to recover about 90 percent of their allowed claims through a combination of cash and common stock. Spiegel failed to file quarterly financial statements for 15 months before it sought bankruptcy-code protection in 2003, according to the Wall Street Journal.
If the bankruptcy plan is approved, Fabian Mansson is slated to be named CEO of the new company, which will be based in Redmond, Wash. Mansson runs the existing 418 Eddie Bauer casual clothing stores. As part of the reorganization, 34 Eddie Bauer Home stores will be closed, and the company will focus on licensing agreements for Eddie Bauer branded home furnishings instead. Spiegel sold it s catalog operations last year, the Journal reported.