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Jax Daily Record Tuesday, Mar. 27, 201812:25 PM EST

Southeastern Grocers expects reorganization plan to take effect this summer

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Jacksonville-based parent of Winn-Dixie projects net income of $48 million in 2019.
by: Mark Basch Contributing Writer

Southeastern Grocers LLC recorded a net loss of $139 million in 2017, but the supermarket operator expects to be immediately profitable after emerging from its prepackaged Chapter 11 bankruptcy case later this year.

Jacksonville-based Southeastern, parent of Winn-Dixie and three other supermarket chains, filed its Chapter 11 bankruptcy petitions Tuesday morning, less than two weeks after announcing most of its unsecured creditors agreed to the plan.

The plan, filed in U.S. Bankruptcy Court for the District of Delaware, calls for unsecured creditors to get 100 percent of the stock of the privately owned company in exchange for about $522 million in notes.

Wells Fargo Bank is trustee for the notes, but court documents filed Tuesday do not say who the individual noteholders are who will be receiving stock.

The stock will not be publicly traded when the company emerges from bankruptcy.

Affiliates of Lone Star Funds, which currently own Southeastern, will get a five-year warrant entitling them to buy 5 percent of the stock.

Besides agreements with the noteholders, Southeastern also has a new agreement with C&S Wholesale Grocers Inc., which supplies 70 percent of its inventory.

New Hampshire-based C&S was listed as Southeastern’s second-largest unsecured creditor, behind the noteholders, with a claim of $109 million.

With creditors in agreement, Southeastern filed its restructuring plan and disclosure statement Tuesday along with its Chapter 11 petitions.

The court documents show Southeastern expects to have its plan confirmed in 90 days and become effective in 135 days.

Financial projections in the disclosure statement show Southeastern expects to be profitable in the second half of this year after emerging from Chapter 11.

It projects net income of $48 million in 2019, rising to $91 million in 2021.

Sales were $9.875 billion last year but with expected store closings, sales are projected to drop to $8.45 billion in 2019.

The projections show little sales growth, rising to $8.56 billion in 2021.

Southeastern operates 704 stores in seven Southeastern states, with 447 under the Winn-Dixie banner, 154 under Bi-Lo, 80 under Harveys and 23 under Fresco y Mas.

The company announced plans to close 94 stores as part of its Chapter 11 reorganization and has agreements to sell some stores, which will bring its total to about 580 stores when it emerges.

The documents show Southeastern’s corporate-funded debt will drop from the current $1.33 billion to $741 million under the restructuring plan.

“The restructuring will allow the Debtors to emerge as a stronger company with a healthier balance sheet that can focus on improving their business rather than on managing burdensome financial covenants and underperforming grocery stores,” court documents said.

“Most importantly, the Debtors will have the capital needed to invest in their business to effectively compete in the food retailer market space.”

The filings said competitive pressures and industry conditions starting in 2015 led to its financial difficulties.

“The Company experienced reduced profitability and liquidity as a direct result of falling produce and retail food prices, and competitors’ increased willingness to engage in price-based competition,” they said.

The company began negotiating with creditors in September 2017, leading to the Chapter 11 plan.

Southeastern has 53,300 employees, including 15,100 who work full time. The documents do not say how many jobs may be lost in the restructuring.

Southeastern will have a five-member board of directors when it emerges from Chapter 11, including CEO Anthony Hucker, according to court documents.

“Today, with the support of our key stakeholders, we are taking the next step in the implementation of our financial restructuring plan,” Hucker said in a news release Tuesday.

“We are extremely pleased that this process continues to proceed quickly and as planned.”

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