Winn-Dixie Stores files for Chapter 11 after vendors tighten terms

By Ellen Chang

Houston, Feb. 22 - Winn-Dixie Stores, Inc. and 23 of its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.

All 920 Winn-Dixie stores in eight states and the Bahamas will remain open.

Winn-Dixie said it filed Chapter 11 after some vendors tightened trade credit in response to its announcement of increased losses and reduced liquidity in the second quarter, coupled with subsequent credit downgrades from the major debt rating agencies. The tighter trade terms further reduced cash availability, the company said.

Winn-Dixie has a commitment for an $800 million debtor-in-possession financing facility from Wachovia Bank, NA, according to a Tuesday filing. Subject to court approval, the DIP credit facility, which replaces the company's previous $600 million credit line, will be used to supplement the company's cash flow during the reorganization process.

Availability on the new facility will be set by a borrowing base. Of the total $100 million initially is leasehold availability, with the amount to be based on leasehold property once appraisals have been carried out.

Interest on the facility is Libor plus 175 basis points or Libor plus 375 basis points for leasehold availability and Libor plus 700 basis points for supplemental junior availability.

The facility's unused fee is 37.5 basis points.

The subfacility letter of credit fee is 1%. The standby letter of credit fee is 1¾%.

The closing fee is 1% of non-leasehold availability plus 2.5% of leasehold availability.

The DIP facility runs for two years unless Winn-Dixie exits Chapter 11 earlier.

Before filing for Chapter 11, Winn-Dixie has a $400 million three-year revolving credit facility and a $200 million three-year letter of credit facility that is secured by the assets of the stores.

It also has outstanding $300 million of unsecured 8 7/8% senior notes due 2008 held by 27 holders and 142,161,122 shares of common stock outstanding held by 36,167 holders.

The 10 largest trade creditors and the amounts owed are: $15.07 million to Kraft of Chicago, $14.56 million to Pepsico of Dallas, $6.07 million to Procter & Gamble of Atlanta, $4.26 million to Nestle of Atlanta, $3.69 million to General Mills of Atlanta, $3.02 million to Unilever of Clinton, Conn., $2.9 million to Florida Coca-Cola, $2.8 million to ConAgra Grocery Products of Atlanta, $2.39 million to Kimberly Clark of Dallas and $2.06 million to McKee Foods Corp. of Collegedale, Tenn.

The 10 largest institutional creditors are: $300 million owed to Wilmington Trust Co., in Wilmington, Del. as trustee for noteholders, $44.95 million to Capital Research and Management Co. of Los Angeles as a noteholder, $23.59 million to Vanguard Group Inc. of Valley Forge, Pa., as a noteholder, $9.93 million to Ameriprime Funds of Portland, Ore., as a noteholder, $2.15 million to Reliance Standard Life of Philadelphia as a noteholder, $1.18 million to Fortis Benefits Insurance of Milwaukee as a noteholder, $1.1 million to Goodman & Co. Investment Counsel of Toronto as a noteholder, $1.03 million to Wellington Management Co. LLP of Newark, N.J., as a noteholder, $1 million to Securities Management and Research, Inc. of League City, Texas, as a noteholder, and $775,000 to Aviva Life Insurance Co. of North Quincy, Mass., as a noteholder.

In its most recent quarterly report on form 10-Q, Winn-Dixie reported total assets of $2.236 billion and total liabilities of $1.871 billion as of Jan. 12.

The company's subsidiary in the Bahamas was not included in the Chapter 11 filing and is operating as normal. WIN General Insurance, Inc., the company's captive insurance entity, also was not included in the filing.

As part of its reorganization, Winn-Dixie also plans to :

* Evaluate the performance of every store and the terms of every lease in the company's real estate portfolio with the objective of achieving a rationalized store "footprint" that allows the company to operate profitably and increase cash flow and return on invested capital;

* Seek bankruptcy court approval to immediately terminate the leases of two warehouses and approximately 150 stores that were closed previously resulting in an annual cash savings of $60 million; and

* Pursue all opportunities to further reduce annual expenses and to sell non-core assets, including all remaining manufacturing operations.

Winn-Dixie's legal advisors are Skadden, Arps, Slate, Meagher & Flom LLP and King & Spalding LLP. The company's financial advisors are XRoads Solutions Group LLC and The Blackstone Group LP.

Winn-Dixie Stores, Inc., headquartered in Jacksonville, Fla., is one of the nation's largest food retailers. It filed for Chapter 11 on Feb. 21. Its case number is 05-11063.

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