Southland Corp. Says It May Miss Debt Payments : Problems: Firm says sales at its 7-Eleven stores are below expectations. Buyout in 1987 saddled company with huge debt.

Southland Corp. said Tuesday that it may be unable to make payments due in 1991 on debt it incurred in its $4.9-billion leveraged buyout and is considering a recapitalization or other restructuring.

Southland, which was acquired by its founding Thompson family in the 1987 buyout, until now had maintained that it could meet its debt obligations. But the company said previous sales projections at its 7-Eleven convenience stores had not been met.

Financial analysts for months have been expressing concerns that Southland faced problems with the huge debt.

President Jere W. Thompson said Southland would meet its $225-million principal payment due next month.

But “given the convenience retailing environment, Southland believes its working capital may not be sufficient in 1991 to meet its principal and interest obligations and other requirements of the business.”

Company spokeswoman Markeeta McNatt said an additional $66-million interest payment is due in 1991, adding to the bank interest and $140 million in cash interest that Southland already is paying.

“The last public projections we had were October, 1988, and the operating numbers that we were projecting have not materialized,” she said. “Our sales and margins are still extremely good, but they have not met our own projections.”

The company projected inflation-adjusted sales growth of 2%. However, McNatt said, inflation had been higher than anticipated and real growth amounted to only less than 1% during the first nine months of this year.

“The summer was disappointing for the entire convenience store industry. It was a cold, wet summer for most of the country, especially our major markets,” McNatt said.

Thompson said Southland is “absolutely committed to improving our operating results. In addition, we feel it is only prudent to consider financial restructuring alternatives well in advance of the time this cash shortfall could occur.”

He said one alternative was a comprehensive recapitalization. In a recapitalization, a company alters its levels of debt and equity.

Southland said Tuesday that for the first nine months of this year, it lost $243.76 million, or $1.55 a share, compared to a loss of $179.2 million, or $1 a share, in the year-earlier period. The loss this year included a $56-million charge from exchange of debt. Nine-month revenue rose to $6.29 billion from $6.02 billion.

Southland reported a third-quarter loss of $63.37 million. Revenue rose to $2.23 billion from $2.18 billion.

The company has been selling assets since the leveraged buyout to help pay off its debt.

Southland also announced Tuesday that it had agreed to sell its 58 Hawaiian stores to 7-Eleven Japan Co. for $75 million cash. The deal is expected to close by year-end.

Last week, Southland said it had agreed to sell its remaining 50% interest in Citgo Petroleum Corp. to Venezuela’s state-owned oil company for $675 million. The sale should be completed by the end of January, the company said.

Proceeds from both transactions will be used to reduce the buyout debt, the company said.

Thompson said the company also continues to explore selling other assets, including its five distribution centers and six food-processing centers.