7-Eleven Parent Files For Chapter 11 Bankruptcy Protecton
DALLAS (AP) _ Southland Corp., owner of the 7-Eleven chain that pioneered convenience store shopping, filed for protection from its creditors Wednesday. The company was driven into federal bankruptcy court by tough competition and the burdens of paying off a $4.9 billion debt-financed takeover.
Southland spokeswoman Cecilia Stubbs Norwood said said store operations would be unaffected by the bankruptcy proceeding.
The Chapter 11 filing came just after midnight, ending months of negotiations that had failed to persuade enough creditors to go along with a refinancing. The plan would have paid them pennies on the dollar for their $1.8 billion in bonds and given them ownership of 25 percent of the company.
The filing listed assets of $2.53 billion and liabilities of $3.38 billion. With the filing, Southland submitted a ″prepackaged″ reorganization plan that had been approved by about 90 percent of the debtholders, enough to win confirmation in bankruptcy court.
The plan is essentially the same as a proposal that failed to win the support of 95 percent of the company’s bondholders. Creditors refused to go along with the plan unless the bondholders agreed by Tuesday.
A Chapter 11 filing allows a company to operate - under court supervision - in hopes it can work its way back to health rather than fold.
U.S. Bankruptcy Judge Harold C. Abramson set a Dec. 14 hearing on the matter.
Southland spokeswoman Cecilia Stubbs Norwood said the company had commitments for $400 million in financing while it proceeds through the bankruptcy. She said officials hoped to emerge from court supervision before the end of the year.
Southland has been struggling since 1987 when the founding Thompson family, fearing a takeover by the Belzbergs of Canada, took the company private. They bought control from public shareholders in a $4.9 billion deal financed with borrowing.
The buyout, which at the time was the nation’s second biggest, became more expensive on Oct. 19, 1987, when the Dow Jones industrial average plunged 508 points. The crash made it more difficult and more expensive to arrange financing.
Southland first proposed buying back its bonds at a discount in March, acknowledging that dwindling profits would make it impossible to meet the debt brought on by the 1987 buyout.
In April, Southland revealed a fourth-quarter loss of $1.01 billion.
At first, Southland proposed selling 75 percent of the company for $400 million to Ito-Yokado Co. Ltd. and Seven-Eleven Japan Co. Ltd., its Japanese franchise holders.
The Thompson family were to keep 15 percent and the creditors would get the rest, along with new securities.
But not enough bondholders would go along. In July, the Japanese company agreed to take a smaller piece of the company, 70 percent, and provide more money, $430 million.
The Thompsons also agreed to cut their holdings to 5 percent, while creditors got 25 percent of the reorganized company in addition to improved terms on their bonds.
However, creditors forced Southland to require that 95 percent of the bondholders go along before they would agree to the swap, and the threshold proved too high to meet by this week’s deadline.
The reorganization plan submitted to the court is similar.
If it succeeds, it will end the Thompson family’s control of the company. None of the three brothers who run Southland would comment on the bankruptcy, Ms. Norwood said.