Winn-Dixie produce debt could reach $20 million
Winn-Dixie produce debt could reach $20 million
In the early throes of the Winn-Dixie filing of Chapter 11 bankruptcy protection, the size of the debt is as much speculation as anything else. With that said, the early speculation is that the produce debt could reach $20 million.
But regardless of the size of that debt, Winn-Dixie attorneys have moved quickly to assure produce creditors that they would be paid quickly according to the regular terms of the PACA Trust. The trust provisions of the Perishable Agricultural Commodities Act call for produce creditors to be first in line, and essentially be able to reap the returns from the produce they provided on credit to the retailer.
Winn-Dixie filed for bankruptcy protection on Monday, Feb. 21, and the following day its attorneys were in court filing "first-day motions? including one to allow for the payment of PACA Trust pre-petition claims.
Patricia Rynn of Rynn and Janowsky, a California law firm specializing in produce-industry law, said that it appears to be a fairly straight-forward bankruptcy and a "true reorganization. It appears to be pre-packaged and a well-thought-out bankruptcy proceeding designed to bring Winn-Dixie back in a stronger position."
On Feb. 22, Ms. Rynn fielded calls from many shipper clients. Though she had not finalized agreements to represent all of those shippers in the bankruptcy proceedings, she said her callers had a total debt of about $7 million.
Lou Diess of McCarron-Diess, a Washington, DC, law firm specializing in the produce industry, said that he was representing $3 million to $5 million in debt. "And I have talked to another attorney that has a similar amount," he said. "If all the preliminary talk is accurate, I would say that the produce debt could approach $20 million."
Both attorneys, speaking for their clients, as well as reports from a couple of Winn-Dixie produce suppliers, revealed that Winn-Dixie was fairly current with its creditors. One large California shipper said that Winn-Dixie was current, but the retailer is a large client, so 30 days worth of debt is still quite substantial.
Winn-Dixie?s larger produce suppliers appear to have debt in the range of $1 million to $2 million each.
Ms. Rynn said that the expectation is that the PACA Trust will prove its worth once again with all of the qualified produce suppliers receiving 100 cents on the dollar. Mr. Diess estimated that payments to PACA Trust suppliers could take place within 30-60 days.
A produce supplier can protect his or her assets under the PACA Trust by extending proper terms to the buyer and having the terms properly stated on the invoice. Virtually all produce suppliers now include the correct terminology on their invoices.
While the PACA Trust will most likely leave produce creditors in good shape, other creditors may not be so fortunate, and Wall Street reacted very negatively to the bankruptcy announcement. Shares of Winn-Dixie had been cut in half in the weeks leading up to the bankruptcy as the company reported heavy losses of close to $400 million during the last quarter of 2004.
In addition, rumors about the pending Chapter 11 filing were widespread since mid-February. Trading of the stock was suspended Feb. 22, but it reopened the following day and plummeted to 59 cents a share. A year ago it was $6.
When announcing the bankruptcy, Winn-Dixie said that it had obtained $800 million debtor-in-possession financing from Wachovia Bank, replacing a previous $600 million credit line, to supplement cash flow during reorganization.
All 920 of its stores in eight states and the Bahamas remained open, but there was expectation that many stores would eventually be closed. Winn-Dixie announced that it would seek the bankruptcy judge?s permission to immediately terminate the leases of two warehouses and 150 stores that could save about $60 million annually. The store leases were for properties that had previously been closed. It is also looking to sell all its manufacturing operations.
Winn-Dixie is based in Jacksonville, FL, with all its U.S. stores in the Southeast. It has 79,000 employees, including President and CEO Peter Lynch, who was hired from Albertson?s in December to turn the retailer around.
Reports indicate that Winn-Dixie has lost market share in recent years to Wal-Mart, which has aggressively opened stores in the Southeast.
In a statement, Mr. Lynch said that the reorganization would allow the firm to compete in the future. "This includes achieving significant cost reductions, improving the merchandising and customer service in all locations, and generating a sense of excitement in the stores."
But regardless of the size of that debt, Winn-Dixie attorneys have moved quickly to assure produce creditors that they would be paid quickly according to the regular terms of the PACA Trust. The trust provisions of the Perishable Agricultural Commodities Act call for produce creditors to be first in line, and essentially be able to reap the returns from the produce they provided on credit to the retailer.
Winn-Dixie filed for bankruptcy protection on Monday, Feb. 21, and the following day its attorneys were in court filing "first-day motions? including one to allow for the payment of PACA Trust pre-petition claims.
Patricia Rynn of Rynn and Janowsky, a California law firm specializing in produce-industry law, said that it appears to be a fairly straight-forward bankruptcy and a "true reorganization. It appears to be pre-packaged and a well-thought-out bankruptcy proceeding designed to bring Winn-Dixie back in a stronger position."
On Feb. 22, Ms. Rynn fielded calls from many shipper clients. Though she had not finalized agreements to represent all of those shippers in the bankruptcy proceedings, she said her callers had a total debt of about $7 million.
Lou Diess of McCarron-Diess, a Washington, DC, law firm specializing in the produce industry, said that he was representing $3 million to $5 million in debt. "And I have talked to another attorney that has a similar amount," he said. "If all the preliminary talk is accurate, I would say that the produce debt could approach $20 million."
Both attorneys, speaking for their clients, as well as reports from a couple of Winn-Dixie produce suppliers, revealed that Winn-Dixie was fairly current with its creditors. One large California shipper said that Winn-Dixie was current, but the retailer is a large client, so 30 days worth of debt is still quite substantial.
Winn-Dixie?s larger produce suppliers appear to have debt in the range of $1 million to $2 million each.
Ms. Rynn said that the expectation is that the PACA Trust will prove its worth once again with all of the qualified produce suppliers receiving 100 cents on the dollar. Mr. Diess estimated that payments to PACA Trust suppliers could take place within 30-60 days.
A produce supplier can protect his or her assets under the PACA Trust by extending proper terms to the buyer and having the terms properly stated on the invoice. Virtually all produce suppliers now include the correct terminology on their invoices.
While the PACA Trust will most likely leave produce creditors in good shape, other creditors may not be so fortunate, and Wall Street reacted very negatively to the bankruptcy announcement. Shares of Winn-Dixie had been cut in half in the weeks leading up to the bankruptcy as the company reported heavy losses of close to $400 million during the last quarter of 2004.
In addition, rumors about the pending Chapter 11 filing were widespread since mid-February. Trading of the stock was suspended Feb. 22, but it reopened the following day and plummeted to 59 cents a share. A year ago it was $6.
When announcing the bankruptcy, Winn-Dixie said that it had obtained $800 million debtor-in-possession financing from Wachovia Bank, replacing a previous $600 million credit line, to supplement cash flow during reorganization.
All 920 of its stores in eight states and the Bahamas remained open, but there was expectation that many stores would eventually be closed. Winn-Dixie announced that it would seek the bankruptcy judge?s permission to immediately terminate the leases of two warehouses and 150 stores that could save about $60 million annually. The store leases were for properties that had previously been closed. It is also looking to sell all its manufacturing operations.
Winn-Dixie is based in Jacksonville, FL, with all its U.S. stores in the Southeast. It has 79,000 employees, including President and CEO Peter Lynch, who was hired from Albertson?s in December to turn the retailer around.
Reports indicate that Winn-Dixie has lost market share in recent years to Wal-Mart, which has aggressively opened stores in the Southeast.
In a statement, Mr. Lynch said that the reorganization would allow the firm to compete in the future. "This includes achieving significant cost reductions, improving the merchandising and customer service in all locations, and generating a sense of excitement in the stores."
