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Fleming Rises On Sale Agreement; Investors Hang On For Bigger PayDay

12 Jul 2003

Fleming Companies term loan "B" soared to the 94-96 range from the 88 level after the company announced that it has signed a definitive agreement to sell its wholesale grocery business to C&S Wholesale Grocers for an estimated purchase price of $400 million. But investors are holding onto the debt and some believe that the company could be headed toward a liquidation type of reorganization. "I don't think that Fleming is going to exist at the end of the day," noted one dealer. While the company continues to support the operations of its other business segment, its Core-Mark convenience business, Fleming has acknowledged that it has received "expressions of interest" from potential financial and strategic buyers for that business.

No trades could be confirmed for the bank debt, which is said to be held largely by original lenders. Very little paper traded when the levels sunk into the 83 context, when the situation was pretty choppy, said the dealer. Those who were able to buy the paper at its discounted levels will be handsomely rewarded, but most of the investors will not sell at this time because they believe the name still has five or six points left in it, he added. The credit facility is secured by all of Fleming's inventory and receivables. The proceeds from the sale of the wholesale grocery segment are expected to drastically reduce the senior leverage, said the dealer. In contrast, the market for the company's 101/8% senior notes would suggest that a similar recovery is not expected to come to holders of those notes. The notes were trading in the 1315/16 ­ 15 range last Thursday.

Fleming has filed a motion with the bankruptcy court to establish the procedures for the sale. The company is looking to receive approval for the auction process at a hearing scheduled for Thursday. An official with The Blackstone Group, which is working with Fleming as a financial advisor, declined to comment. Calls to Rebecca Roof, Fleming's interim cfo, Ted Stenger, Fleming's chief restructuring officer, and attorneys representing the company and the bank group, were not returned by press time.

12 Jul 2003