SMITH'S SETS UP TRUST TO CUT DEBT

ELLIOT ZWIEBACH

SALT LAKE CITY -- In an effort to improve its balance sheet, Smith's Food & Drug Centers here has gone to the public debt and equity market for financing.

But instead of relying on more conventional means, Smith's is raising capital to lower the debt on eight of its 30 southern California stores and its Riverside, Calif., distribution center by setting up a special trust. The trust, called Smith's Food & Drug Centers 1994 -- A Trust, sold about $300 million worth of pass-through certificates early this month. Smith's previously sold eight of its California stores and the warehouse to the trust in a sale-leaseback arrangement. The trust sold the pass-through certificates to help pay for the stores.

Additionally, Philip Morris made an equity investment in the trust and has taken on the role of lessor of the stores.

Now Smith's will make monthly rent payments on the eight stores and warehouse to the trust.

Robert D. Bolinder, executive vice president of Smith's, said the chain used about half of the $300 million to lease back the facilities and will use the balance later this year for other real estate transactions.