NEW YORK -- A U.S. Bankruptcy Court judge here last week approved Winn-Dixie's motions to receive $800 million in financing and to stop paying rent at 150 closed stores and warehouses.
The financing and lease rejections were among 25 approved "first-day motions" allowing Winn-Dixie to keep day-to-day business running while under Chapter 11 bankruptcy protection. Other motions assured that Winn-Dixie could continue to pay salaries and benefits for employees; continue to honor obligations under its shopping rewards program; and pay for goods and services provided after Winn-Dixie's petition date of Feb. 22.
Also last week, trading of Winn-Dixie stock was suspended by the New York Stock Exchange. It resumed under a new symbol, WNDXQ, on the OTC bulletin board, also known as the "pink sheets." Shares were trading there at around 70 cents late last week, down from a 52-week high of $8.42.
This week, the U.S. Trustee in New York is scheduled to assemble a committee of creditors to work with Winn-Dixie on a plan of reorganization.
Peter Chapman, who follows troubled companies for Bankruptcy Creditors' Service, Fairless Hills, Pa., told SN that unsecured creditors will likely jockey for representation on the committee to see their respective objectives are met. A creditors' committee typically consists of seven of the debtor company's largest unsecured creditors.
"It's pretty typical in retail bankruptcies to see tremendous tension between bondholders and trade creditors to see who gets to dominate the creditor committee," Chapman said. "Trade creditors generally will argue to keep the company operating even if it loses $300 million a quarter because they can earn back a portion of their loss as Winn-Dixie reconfigures. Bondholders by contrast don't have a way to recoup their money by selling to the debtor. If it's losing money, they might say, 'Liquidate it, we'll take what we can get."'
The $800 million in debtor-in-possession (DIP) financing from Wachovia Bank, Charlotte, N.C., replaces a $600 million unsecured credit line from the same lead lender. The financing is secured by liens on all assets and properties of Winn-Dixie. A hearing to finalize the DIP package is scheduled for March 15.
The company said it would file schedules of assets and liabilities, a statement of financial affairs and a list of leases and contracts no later than March 8. Its deadline to make decisions about further lease dispositions is March 22.
Also approved were Winn-Dixie's motions to name Skadden Arps lead counsel and King & Spalding as counsel; Blackstone Group to serve as financial adviser; XRoads Solution Group to provide restructuring consulting services; Kirschner & Legler as special counsel regarding credit agreements and asset dispositions; and Smith Gambrell & Russell to advise the company on lease obligations.
