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Financial challenges ahead for Southeastern Grocers

Moody’s Investors Service downgraded Southeastern Grocers, the Jacksonville, FL-based parent of the Bi-Lo, Harveys and Winn-Dixie chains, to indicate a high degree of risk. A debt of $1 billion has the grocer considering a Chapter 11 bankruptcy restructuring, according to various reports.southeastern

Southeastern has $475 million in unsecured notes issued by the holding company due to mature in September 2018. It also has $425 million in senior secured notes issued by the operating company due Feb. 15, 2019

"The high refinancing risk due to the company's significant debt maturities in 2018 and 2019 is a cause for concern as the current capital structure is unsustainable and the weak liquidity primarily due to the significant debt maturities increases the probability of a distressed exchange, hence the downgrade," said Moody's Vice President Mickey Chadha. "From an operating performance standpoint [Southeastern Grocers] has demonstrated improvement in EBITDA and credit metrics and we expect this trend to continue.”

According to a Bloomberg report, the company is evaluating a debt-for-equity swap that would give current bondholders an ownership stake, but it has not yet determined whether or not to do that through a bankruptcy filing. 

Sources said Southeastern Grocers has shown improved financial and sales performance this year, slowing the rate of comp declines behind investment in new store formats, including Fresco Y Mas, which has replaced a number of Winn-Dixie stores in heavily Hispanic communities, and Harveys, which has expanded at former conventional sites as a value focused banner.