Newspaper article THE JOURNAL RECORD

Fleming Stock Plunges amid Debt Downgrade Rumors

Newspaper article THE JOURNAL RECORD

Fleming Stock Plunges amid Debt Downgrade Rumors

Article excerpt

NEW YORK (AP) -- Shares of Fleming Cos. plunged Wednesday, amid unconfirmed rumors that the company's debt may be downgraded.

The shares rebounded somewhat late in the day, after the food distributor said it would hold a conference call Thursday "to discuss errant speculation and to correct misleading information in the marketplace."

Shares of Fleming closed at $8 on the New York Stock Exchange, down $1.31, or 14.1 percent. The day's lowest level was $7.05, which was a new 52-week low surpassing the prior low of $9 set September 3.

Fleming shares have lost almost half their value since late July, when the company reported second-quarter earnings.

Fleming moved its headquarters from Oklahoma City to the Dallas area in mid-2000. In may, Fleming said it would close its distribution center with 280 employees in Oklahoma City and shift those functions to a Tulsa facility.

Fleming has been struggling to maintain cash flow this year amid a heavy debt load. It could suffer if its borrowing costs increased, one trader said.

"These guys are going to have to raise money again at some point," the trader said. "They need to be able to throw that debt onto the balance sheet to grow the business with acquisitions, because this is not a growth-business period."

The sharpness of Wednesday's drop might be justified if Fleming's junk-rated senior unsecured debt were downgraded three notches to triple-C, said another trader.

"That's not normally the kind of downgrade you get in the absence of news," the trader said.

Fleming's senior unsecured debt is currently rated single-B-plus by Standard & Poor's.

No major news about Fleming appeared on major newswires Tuesday or Wednesday morning, when the sell-off began. Fleming on Wednesday afternoon issued a press release that appeared to attack an unspecified class-action lawsuit filed late Tuesday, in addition to a class-action lawsuit filed last week.

A shareholder lawsuit was filed last week that accused Fleming's management of touting the health of its retail operation to investors earlier this year while operations deteriorated. …

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