Winn-Dixie has secured an $800 million debtor-in-possession (DIP) from Wachovia Bank, which replaces its $600 million credit line. "We intend to use this reorganization process to take the actions necessary to position Winn-Dixie for future success," says Peter Lynch, the grocer's president and CEO, in a statement. "This includes achieving significant cost reductions, improving the merchandising and customer service in all locations and generating a sense of excitement in the stores."

During its Q2, which it reported earlier this month, the chain posted a net loss of $399.7 million compared to $79.5 million for the same period in fiscal 2004. Same-store sales during the quarter dropped 4.9% from the same year-ago period.

Officials have blamed the company's woes on increased competition in their regions, and observers have said that Wal-Mart has given retailer stiff competition. Last year the company closed 156 stores, most of them in non-core markets, such as the Midwest, Virginia, and North and South Carolina.