NEW YORK Winn Dixie Stores Inc. has agreed to pledge security against a new $800 million loan from First Union Corp. and Merrill Lynch & Co. a concession that it did not have to make on its last loan.
We did what we needed to get the transaction done, said Richard McCook, Winn Dixies chief financial officer. The Jacksonville, Fla., grocery chain pledged the stock of some of its subsidiaries as collateral.
The company, whose debt ratings are a step away from junk status, is the latest to feel the effect of tightening lending standards by banks, which want more security and higher yields at a time of slowing economic growth, rising defaults, and mounting loan losses.
Two weeks ago, Lucent Technologies Inc., another investment-grade borrower, gave up security for the first time on a new $4.5 billion credit line.
Investment-grade companies generally do not have to offer collateral because they generate enough cash to pay back their debts. But the recent reduction of high-rated borrowers such as Owens Corning and Xerox Corp. to junk has led jittery banks to ask for greater concessions from borrowers that could have debt downgrades.