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JACKSONVILLE, Fla. -- Assuming that its shareholders will have "no meaningful recovery" under a plan of reorganization, Winn-Dixie Stores, Inc. said yesterday during U.S. Bankruptcy Court proceedings that it supports the recent decision of the U.S. Trustee to disband the committee of Winn-Dixie equity security holders.
The committee was disbanded on Jan. 11, and a motion for reinstatement remains pending before the Court.
The Equity Committee was created in August 2005 to represent the interests of Winn-Dixie's shareholders in the company's Chapter 11 proceedings. "Although the company supported the creation of the Equity Committee at that time, Winn-Dixie has now concluded that the U.S. Trustee's disbandment of the Equity Committee is appropriate in light of current information," Winn-Dixie said in a statement. "This information includes Winn-Dixie's recent financial statements and its recently completed confidential business plan, which contains forecasts regarding the profitability of the reorganized company. While the company believes the business plan shows that Winn-Dixie will be able to reorganize successfully, it also makes it relatively clear that there is no substantial likelihood of a meaningful recovery for existing shareholders under a plan of reorganization."
Winn-Dixie noted that the value of its common stock, if any, will be determined upon the confirmation of a plan of reorganization. "The company's objective is to negotiate a plan of reorganization that maximizes recoveries for all constituencies, including existing shareholders," Winn-Dixie said.
Jay Skelton, chairman of the board of directors of Winn-Dixie, added that "Winn-Dixie is making good progress in its reorganization, and we are seeing tangible improvements in our performance, including an increase in identical store sales of more than 7 percent for the second quarter of fiscal 2006, excluding 11 stores in New Orleans that have been closed since Hurricane Katrina."
However, said Skelton, "As we have worked to prepare a plan of reorganization, it has become clear that existing holders of Winn-Dixie common stock will probably receive little or no value for their stock when the company emerges from Chapter 11. While this is not an unusual outcome in most Chapter 11 cases, we deeply regret this news. Fortunately, we do not believe the outlook for the company's existing stock is indicative of the outlook for our business and future financial performance. We are pleased with our progress and excited about our prospects for continued improvement."