Southeastern Grocers’ bill is coming due, and the Jacksonville-based company’s struggle to refinance $1 billion in debt could result in a Chapter 11 bankruptcy restructuring, according to industry analysts.
Southeastern Grocers, parent company of Bi-Lo, Harveys, Winn-Dixie and Fresco Y Mas, has reportedly hired Evercore, an investment bank, to advise it as the grocer restructures its debt.
SEG had approximately $470 million in notes due in September and another $425 million in notes due in February 2018, according to industry trade publication Grocery Headquarters. Those notes were trading near 32 cents on the dollar Friday.
SEG has been making operating changes all year: Former CEO Ian McLeod resigned in June, and was succeeded by then-chief operating officer Anthony Hucker, who served as interim CEO until his confirmation in August. McLeod had rolled out an upscaling model for some Winn-Dixies, though just a fraction of what had been planned actually happened, and the company has been shuffling the branding of some of its stores for months.
Grocery analyst David Livingston said the operations changes are a smokescreen.
“This has been going on for six-to-eight months now,” he said. “Once landlords start calling me, I know they’re in big trouble. Converting stores to Harvey’s? What is that doing? It’s cheap to change the signs around and make it look like you’re doing something. They never made a serious attempt to compete.”
Messages left with Southeastern Grocers were not immediately returned.
Livingston said he’s heard of Winn-Dixie going to some landlords and asking for money to remodel in exchange for an agreement to extend the lease. But, he said, he expects Winn-Dixie likely won’t be in business in five years.
“Nobody wants to loan them (SEG) any money because they don’t think they’re going to get paid back,” Livingston said. “That’s what they’re facing. Debts come due, and unless they can refinance it, they’re going to have a problem.”
He added that it was highly likely that SEG would go into bankruptcy, one of the options the company is reportedly considering.
Winn-Dixie and Bi-Lo, Livingston said, have some of the lowest sales per square foot in the industry. For comparison, Publix operates at three times that level.
Livingston thinks that when SEG declares bankruptcy – there isn’t a way out of it, he said – some of the more successful locations could continue as other supermarkets.
A Winn-Dixie location in Key West, sandwiched between two Publix spots, could do very well. Other prime locations near beaches will also survive. But most of the other stores, Livingston said, will have to be downsized or converted to other retailers.
“Who wants to come into Florida and open a store across the street from Publix?” Livingston said. “There’s no white knight like Kroger coming. They don’t want to buy fixer-uppers, and nobody wants to compete against Publix.”