S&P May Cut Winn-Dixie Ratings

NEW YORK -- Standard & Poor's Ratings Services has placed its ratings on Winn-Dixie Stores, Inc. on CreditWatch with negative implications, in view of substantially lower expectations for earnings and the potential for violation of covenants for the first quarter ending September 2003.

"The company will need to invest substantially in better pricing in 2003, which will likely reduce the operating margin, already below the industry average," said Mary Lou Burde, Standard & Poor's credit analyst.

Based on the company's current projections of operating results for the first quarter of fiscal 2004, S&P said it will not be in compliance with certain bank covenants. The company is working with its banks and expects to obtain an amendment before the end of the first quarter.

The company expects only $6 million of EBIT in the first quarter, compared with $70 million in the prior year period, but anticipates that its strategy of lowering prices will result in sales gains and expense leveraging in the final three quarters of the year.

The company's bank facilities consist of a $100 million 364-day revolving credit facility due March 2004 and a $200 million five-year revolving facility due March 2006.

Although there are no borrowings outstanding, the facility was used to secure $57 million in letters of credit as of June 25. The company had $336 million in funded debt as of June 25.
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