By Tom Lehman
Winn-Dixie could be headed to bankruptcy for a third time, the first two of which happened in 2005 and 2009. The corporate parent of the supermarket chain, Bi-Lo, plans to close 200 of the chain’s stores before or after filing for bankruptcy, which could happen as soon as March.
Bi-Lo may try to avoid Bankruptcy by instead engineering a debt restructuring. It will be interesting to see the outcome, considering that the financial press is reporting that the tax overhaul bill signed into law eliminated the tax loss carry-back provisions. That is important because in the past, those provisions enabled distressed companies to obtain tax refunds on taxes paid prior to their bankruptcy cases. In past Chapter 11 cases, the refunds were substantial and became a key part, if not the centerpiece of, the financing to fund a Chapter 11 debtor’s exit from bankruptcy.
Then again, Winn-Dixie’s filing may just be a real estate play to capitalize on an orderly sale of its below market leases rather than reorganize as just another big box grocery chain.
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Tom Lehman is a LKLSG partner who’s practice focuses on debt restructuring.