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CHICAGO -- Shares of Nash Finch Co. rose more than 59 percent on Wednesday after the food distributor said U.S. regulators would not object to how it accounts for certain vendor charges.
In contrast, shares of another food distributor, Fleming Cos., fell more than 14 percent as a credit rating agency questioned whether the company might lose more business and be forced to pay more suppliers in advance.
Minneapolis-based Nash Finch late Tuesday said U.S. Securities and Exchange Commission staff gave a "favorable response" to its accounting practices, based on the company's oral and written representations.
Nash Finch had said last month it may face liquidity problems, which could include loan covenant breaches or a stock delisting, if the SEC were to conclude the company failed to account for so-called count-recount charges properly. The company said it is still cooperating fully with an SEC investigation that began last October.
Nash Finch also said it hired Ernst & Young to audit its 2002 financial statements. Deloitte & Touche, its former auditor, resigned effective Jan. 28.
Dallas-based Fleming, meanwhile, saw its credit rating cut by independent rating agency Egan-Jones Ratings Co. of Philadelphia to "C," one notch above its lowest grade, from "CC."
"Our concern is that suppliers won't ship without being paid in advance and grocery stores shift more of their orders to other suppliers," Egan-Jones said.
Fleming recently lost key customer Kmart Corp., which accounted for 20 percent of its sales. Last week Fleming said its board approved a change in management, as Chairman and Chief Executive Mark Hansen was ousted.
Many distributors, including Nash Finch and Fleming, have in recent months found themselves reauditing or restating results because of their accounting for vendor payments and discounts.
Nash Finch shares closed Wednesday on the Nasdaq at $8, up $2.98, or 59.4 percent.
Fleming shares fell 19 cents, or 14.3 percent, on the New York Stock Exchange to close at $1.14.
Fleming's 10.125 percent notes maturing in 2008 fell 8.5 cents on the dollar to 39 cents, as their yield rose to 38.29 percent from 31.58 percent, according to NASD bond pricing service TRACE. The levels suggest that investors believe the company is more likely to default than pay its debts.