Competition, credit crunch push Winn-Dixie to Chapt. 11 - Food - Food & Beverages - Company Announcements
Given my background (my family owns a grocery store), it is always sad to see a grocery store declare bankruptcy. However at least the timing was good for my classes as we do capital structure and bankruptcy.
A few things to note from the article:
*Credit ratings do matter in the since that other creditors are less willing to lend money(in this case reducing trade credit). As the article says: "...widening losses...led to credit downgrades and a tightening of the screws by its vendors, further cutting into cash availability"
*Bankruptcy allows the firm to get out of many contracts. For instance "Winn-Dixie also said it would seek a bankruptcy judge's permission to immediately terminate the leases of two warehouses and 150 stores that could save about $60 million annually. "
*As a marketing observation it is worth noting that this is another example of how difficult it is to compete with Wal Mart and how Wal Mart has changed the once stable industry. (It should also be noted that increased competition from restaurants---about 50% of US food dollar is now spent at restaurants--has also played a major role.)
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