ANCHORAGE, Alaska -- Carr Gottstein Foods here said it has decided not to pursue a proposed real-estate sale-leaseback transaction that it originally disclosed last spring. Don Anderson, senior vice president and chief financial officer, said the company had hoped to raise close to $100 million in the deal, which it intended to use to reduce its $158 million debt. But Carr Gottstein officials ultimately decided that the terms and conditions of the transaction "would not be in the long-term best interest of the company," Anderson said. He said approximately $2 million of expenses incurred in connection with the proposed transaction will be included in the chain's third-quarter results. The 38-store company disclosed plans in May for the sale-leaseback of 12 stores and a distribution center to an unnamed institutional equity investor and Teachers Insurance & Annuity Association-College Retirement Equities Fund. Jonathan Ziegler, a securities analyst with Salomon Bros., New York, said he was disappointed that shareholders would have to absorb the $2 million in expenses. "But the company said there were so many parties involved in the deal -- investors, banks and attorneys -- and so many restrictions that were being required, that the deal got out of control and it decided not to proceed."
Piper Jaffray, Minneapolis, responded to Carr Gottstein's announcement by lowering its rating from "market performer" to "buy," noting that the cancellation "prevents unlocking of real estate values, keeps financial leverage high and limits flexibility of financing of expansion opportunities."