WINN-DIXIE EXITS BAHAMAS

JON SPRINGER

JACKSONVILLE, Fla. - In moves designed to generate cash for post-bankruptcy investing, Winn-Dixie Stores here said last week it has agreed to sell its 12 supermarkets in the Bahamas for $50 million and would attempt to sell a distribution center in Pompano Beach, Fla.

The Bahamian supermarkets, operating under the City Market and Winn-Dixie banners, will be sold to a local Bahamian company, BK Foods. The agreement provides for the opportunity of higher and better offers through auction to be held at a later date, Winn-Dixie said.

Under terms of the deal, a Winn-Dixie subsidiary, W-D (Bahamas), would sell its 78% stake in Bahamas Supermarkets, the publicly traded owner of the stores, to BK Foods. The remaining 22% of Bahamas Supermarkets stock will remain publicly traded in the Bahamas. Closing conditions of the deal include obtaining approval from U.S. Bankruptcy Court here. Winn-Dixie said it has agreed to enter into transition services, and non-compete agreements with BK Foods. Although all 12 stores are expected to remain open, the Winn-Dixie banner will be removed from those three stores within six months of the deal closing.

"Although the 12 stores in the Bahamas are profitable, they are not a core business for us," Peter Lynch, chief executive officer of Winn-Dixie, said in a statement. "The additional liquidity generated from this sale will help Winn-Dixie support the remodeling of existing stores and development of new stores in our core U.S. markets."

Winn-Dixie is eyeing a June exit from Chapter 11.

Winn-Dixie also hopes to generate cash from a sale of its Pompano Beach distribution center. The 787,500-square-foot facility, which handles grocery, meat, produce and dairy items, will close by June, the retailer said. Its functions will be handled in Winn-Dixie's Miami distribution center. The transition will begin later this month, Winn-Dixie said. The 280 part-time and full-time employees at Pompano Beach will be offered employment opportunities in Miami, the retailer said.

In other news last week, Winn-Dixie reported sales of $600.5 million for the four weeks that ended March 8, an increase of 2.7% from the previous four-week period.

The monthly report, filed with federal regulators and U.S. Bankruptcy Court here, showed an operating loss of $4.3 million, as compared with a $12.7 million loss in the prior month. Gross profits as a percent of sales of 26.8% increased from 25.9% a month ago, and the retailer reported $94.9 million in cash on hand, up from $89.6 million in the prior month.

Winn-Dixie reported a loss of $7.6 million for the month, as opposed to $15.8 million in the previous month. The company said it gained $1.6 million from the sale of discontinued stores during the period.

Also last week, U.S. Trustee Felicia S. Turner appointed a bondholder, Lonestar Partners, to fill a vacant seat on the retailer's official committee of unsecured creditors. Lonestar, San Francisco, replaced Fort Worth, Texas-based R2 Investments on the committee. Vikas Tandon, the Lonestar representative named to the committee, did not comment on his firm's holdings in the retailer.

Lonestar has no affiliation with Lone Star Funds, the Texas-based group that purchased the Bi-Lo retail chain from Ahold in late 2004.

Lonestar is a hedge fund with a history of investing in bankruptcy and post-bankruptcy situations. The company in September took a 7% stake in Penn Traffic, the Syracuse, N.Y.-based retailer that exited Chapter 11 a year ago.