WINN-DIXIE, VENDORS REACH RECLAMATION AGREEMENT

Jon Springer

JACKSONVILLE, Fla. -- Winn-Dixie will resolve charges for goods it purchased in the days prior to its Chapter 11 bankruptcy filing in exchange for continued credit with its vendors, according to terms of an agreement between the retailer and its vendors detailed in U.S. Bankruptcy Court here.

"This is a good deal for anyone interested in Winn-Dixie's survival," Mark J. Friedman, a lawyer representing an ad hoc committee of Winn-Dixie trade creditors, told SN last week. "For Winn-Dixie to resolve some of the significant issues with its vendors shows all of the creditors, and the vendor community at large, that Winn-Dixie is willing to address the issues that prompted the filing and is looking forward to restructuring itself so it can continue operating into the future."

Winn-Dixie said it received around 480 claims from vendors demanding that goods they sold on credit to Winn-Dixie be returned after learning in February that the retailer was insolvent. The agreement, which represents a compromise of an earlier motion, establishes a streamlined process to identify qualified claims and pay those claims back over time, but requires that vendors who opt to participate provide ongoing trade credit, secured by a junior lien.

A hearing on the motion, which requires court approval, is set for Aug. 4. It has the support of Winn-Dixie's official committee of unsecured creditors, which includes vendor representatives. In a court motion, that commission noted that "establishing the program will allow the debtors and their advisors to concentrate on their operational restructuring and reorganization efforts."

The agreement will minimize disputes between Winn-Dixie and vendors, said Friedman, who worked with a sample group of 22 trade vendors and Winn-Dixie in coming to a compromise.

According to court papers, the agreement covers transactions made within 10 days of Winn-Dixie's Chapter 11 filing on Feb. 21. Reclamation claims would be determined by comparing goods received by Winn-Dixie during the reclamation window and the amount of invoices for those items that remain unpaid, minus a consumption rate of 4% for groceries and 22% for floral items. Winn-Dixie would pay off the claims in nine monthly installments.

In exchange, vendors must provide trade credit to the retailer for a year.

The agreement details treatments of different types of accounts receivable, ranging from slotting allowances to coupons and scandowns.

"The vendor community from day one sought out Winn-Dixie to resolve the issues caused by the Chapter 11," Friedman said. "With those things addressed, they could focus on the real business issues as opposed to legal issues."