7-Eleven Parent Says It May Have to File for Bankruptcy

Southland Corp., the troubled parent of the 7-Eleven convenience store chain, said Monday that it could be forced to file for bankruptcy this year if it fails to restructure its massive debt.

The Dallas-based company also reported a fourth-quarter loss of $1.01 billion after taking a $947-million writeoff that reflected the sale of its 50% interest in Citgo Petroleum Corp. in January.

Southland had previously disclosed that it faced a financial crisis, but Monday’s announcement suggested that the situation has grown worse than previously thought. The company said it expects a key measure of its financial health--its earnings before interest, taxes, depreciation and amortization--to fall below its lenders’ requirements this year, which would put Southland in default.

In a bid to end its troubles, the company last month announced tentative plans to sell a 75% stake in its business to Ito-Tokado Co. of Japan.

Under the proposal, the Thompson family, including Southland Chairman John Thompson, would hold 15% of the remaining company and junk bond holders would own the remaining 10%. If that deal falls apart and no other rescue plan succeeds, however, the company believes that “it would ultimately have to seek relief under the U.S. Bankruptcy Code.”

Southland took on $4.9 billion in debt in a 1987 leveraged buyout. Since then, growing competition, particularly from oil company convenience stores, has cut into the revenues and earnings of the company.

In its fourth quarter, sales climbed nearly 4.5% from a year earlier to $2.06 billion. During the last quarter of 1988, Southland lost $37 million.