Chapter 11 bankruptcy: Winn-Dixie creditors pushed out
The only court-sanctioned committee representing shareholders in the Winn-Dixie Chapter 11 restructuring has been disbanded by a US Justice Department official at the request of a group of unsecured creditors. This leaves shareholders without any official representation in the reorganization plans of the chain-store group.
Although it is normal under Chapter 11 proceedings for shareholders to get a share of company’s assets only after the claims of a company’s creditors have been satisfied, the Winn-Dixie case sets a precedent that could be detrimental to equity investors more generally in the US.
The shareholder panel was disbanded in mid-January by Elena Escamilla, from the Justice Department’s Office of the US Trustee, leaving the official committee of unsecured creditors as the only court-authorized group involved in the Chapter 11 discussions.
According to court documents, the shareholders’ panel was disbanded in response to concerns from the creditors’ committee that the group would have access to confidential information about the company that could be leaked to competitors.
The company plans to emerge from Chapter 11 in June this year. Winn-Dixie has been in Chapter 11 protection since February last year, claiming loss of business to competitors.