NEWS WATCH 2004-08-02 (2)

COURT OKS FLEMING REORGANIZATION AROUND CORE-MARK

here last week approved the reorganization plan of Fleming, Dallas, which calls for the company to reorganize around its Core-Mark convenience store distribution business. Core-Mark, South San Francisco, Calif., is projected to have annual revenues between $4 billion and $5 billion. Certain creditors will receive an equity stake in the new company, which will be funded by loans from General Electric Capital Corp. and Sankaty Advisors. Fleming's remaining assets will be transferred to either a post-confirmation trust or a reclamation trust, both of which will seek to liquidate the remaining assets and settle outstanding claims.

KROGER BUYS THREE FORMER ALBERTSONS IN OMAHA

OMAHA, Neb. -- Three former Albertsons stores here that were scheduled to be sold to locally based No Frills Supermarkets will be sold instead to Kroger, Cincinnati. Fred Witecy, executive vice president and chief operating officer of No Frills, said his company had signed its purchase agreement for the three stores over to Kroger. However, he said it does plan to operate two other former Albertsons that were part of the original transaction and to acquire a third Albertsons property that had been vacated, boosting its store count to 13. Kroger said it plans to operate the three stores here under the Baker's banner as part of its Dillon division. Kroger also said last week it has agreed to acquire an eighth Cincinnati-area Thriftway store from Winn-Dixie following extended negotiations with the store's landlord. Kroger agreed last month to purchase seven other Thriftways there.

COURT APPROVES PENN TRAFFIC LEASE-BACK PLAN

SYRACUSE, N.Y. -- Penn Traffic here received the go-ahead last month to sell and then lease back 21 company-owned stores and its five distribution centers. Money from the sale of the properties will be invested in new stores, equipment, inventory and upgrades, the company said. Permission to sell the stores was granted by the U.S. Bankruptcy Court for the Southern District of New York, which also granted the company's request to extend the deadline for filing a plan of reorganization until Sept. 26 -- the fourth time the deadline has been extended. Penn Traffic has been operating under Chapter 11 bankruptcy protection since May 2003. Of the chain's 111 remaining stores, all but the 21 are leased. Penny Curtiss Baking, its baking facility, is also leased. Under the lease-back plan, Penn Traffic would sell the stores and distribution centers to Keen Realty, Great Neck, N.Y., which would then lease them back to the company.

NEW-STORE PLANS PUT MEIJER 'BACK IN GROWTH MODE'

GRAND RAPIDS, Mich. -- Meijer here said it is stepping up its store development program with nine stores in the 2005 pipeline. "We're getting back in the growth mode," John Zimmerman, a spokesman for the chain, told SN. Meijer opened seven new stores in 2001, but just one in 2002 and two last year. Earlier this year, the chain underwent a restructuring during which 1,900 employees were pared. Meijer will open five new stores during 2004, including three next week in Rockford, Mich.; Rossford, Ohio; and Noblesville, Ind.

REPORT: WINN-DIXIE LEASES COULD BE WORTH $1 BILLION

NEW YORK -- Winn-Dixie Stores, Jacksonville, Fla., can unlock hidden value from its real estate in the form of below-market leases, according to a research report released by Deutsche Bank here this week. The report, which studied the real-estate value of 37 retailers, also found that the stock-market capitalization of Kmart, Troy, Mich., and six other retailers was less than the total worth of their real-estate assets. The report noted that Winn-Dixie, which is attempting to sell as many as 156 stores in a restructuring plan, pays rents that are about $2 to $3 per square foot below market value. "The leases could be worth $1 billion to $1.5 billion," the report said, although it noted that Winn-Dixie may have trouble selling the properties to another grocer.