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Gocery store windixie dies out to wal mart

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   http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=7704056

http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=7704056

UPDATE 5-Winn-Dixie files bankruptcy; loses out to Wal-Mart
Tue Feb 22, 2005 03:35 PM ET

(Adds NYSE suspending stock in paragraph 17-18)
By Ellis Mnyandu

NEW YORK, Feb 22 (Reuters) - Winn-Dixie Stores Inc. (WIN.N: Quote, Profile, Research) , once among the most profitable of U.S. grocers, on Tuesday said it filed for bankruptcy protection, succumbing to stiff competition from giant discounter Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) .

The grocer, founded in 1925, said it had lined up an $800 million debtor-in-possession financing from Wachovia Bank, replacing a $600 million credit line.

It filed Chapter 11 petitions late on Monday at the U.S. Bankruptcy Court for the Southern District of New York, according to a company statement. Winn-Dixie said the petition covered itself and 23 U.S. subsidiaries.

It said its 920 Winn-Dixie stores remained open, but analysts expected that number to be trimmed because the company can now ditch leases it does not want. Jacksonville, Florida-based Winn-Dixie said it would seek to sell assets and terminate leases of about 150 stores it had closed.

The petition listed assets of $2.23 billion and debts of $1.87 billion.

Winn-Dixie said it owed $15.1 million to its biggest trade creditor, Kraft Foods Inc. (KFT.N: Quote, Profile, Research) and affiliates. Kraft said it has adequate bad debt reserves to cover any fallout.

For years, Winn-Dixie dominated markets across the U.S. South and in the Bahamas. But analysts said it has lost touch with customers and grown burdened by dilapidated stores. Its latest quarterly loss was larger than expected.

In recent years, it has lost market share to rivals including Publix Super Markets, Inc. and Wal-Mart.

Despite a 10-month restructuring and a push to improve operations and cut costs, Winn-Dixie continued to struggle. Vendors tightened supply terms in the past two weeks.

Newly installed Chief Executive Peter Lynch, a former Albertsons Inc. (ABS.N: Quote, Profile, Research) executive, said in a statement the company would work on "significant cost reductions, improving the merchandising and customer service in all locations."

Corporate bond holders were encouraged by potential savings of about $60 million a year from lease terminations. Prices of the company's 8.875 percent notes due 2008 rose about 0.38 cents on the dollar to 58.875 cents, according to MarketAxess.

Approximately 27 bond holders own the company's $300 million of senior unsecured notes, according to the filing.

TOUGH DAYS AHEAD

Evan Mann, a senior bond analyst at Gimme Credit, said some customers would probably view the bankruptcy as another reason not to shop at Winn-Dixie.

"The real big issue is what's going to happen over the next one or two quarters now that they are in bankruptcy and all their customers see this in their local newspapers.

"Bad publicity," he said, "it gives a lot of their competitors maybe a window to steal customers and maybe to be a little bit more aggressive on price. If they could maintain their sales, then that would be encouraging about their ability to reorganize."

The New York Stock Exchange said it suspended trading in Winn-Dixie on Tuesday, after shares slumped to 73 cents in pre-market trade on the Inet electronic brokerage system from a Friday NYSE close of $1.47.

According to the NYSE, Winn-Dixie expected the stock to trade on the over-the-counter bulletin board. The stock had largely become a one-way bet for short-sellers -- contrarian investors who profit when a stock plummets.

Analysts said Winn-Dixie must scale down operations, focus on profitable markets and avoid going head-to-head with Wal-Mart, whose size allows it to extract better terms from suppliers.

Winn-Dixie's bankruptcy filing came as U.S. movie theaters began screening "Because of Winn-Dixie," a film about a young girl who adopts an orphaned dog, named Winn-Dixie for the supermarket where she found him. (Additional reporting by Nicole Maestri and Dan Wilchins)



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