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The Financial Times reports that Dutch retailer Ahold is considering a "rights issue" that would allow it to raise about $2.2 billion (US) that it could put toward its $13.2 billion debt load.

For those not familiar with the term, defines a rights issue as "a privilege allowing existing shareholders to buy shares of an issue of common stock shortly before it is offered to the public, at a specified and usually discounted price, and usually in proportion to the number of shares already owned." Implicit in the FT report and the definition is the notion that Ahold plans to make new shares in the company available to the general public after the sale to existing shareholders, and by doing so raise additional monies to reduce its debt.

However, the company would not confirm that this course of action is being considered. "That is speculation and I won't comment on that," said Ahold spokesman Walter Samuels about the FT report.

From all reports, cutting debt seems to be the major priority at Ahold headquarters these days, as the company prepares for a shareholder meeting this Thursday at which the company's new CEO, Anders Moberg, plans to unveil his strategy for the company’s future.

Ahold has been in turmoil since February, when revelations about accounting irregularities - especially more than $800 million in overstated profits at its US Foodservice subsidiary - forced the resignations of its CEO and CFO. Since then, there have been additional revelations about accounting issues at other divisions, and governmental investigations have been launched on both sides of the Atlantic.

In advance of the Thursday meeting, there are reports emanating from various sources that Ahold plans to cut three-to-four percent of the headquarters and store-level workforce at its flagship Albert Heijn chain in The Netherlands, and that contrary to plans made as far back as June, it now plans to hang onto its US Foodservice division and not sell it off.

In a related story, Reuters reports that the company's Argentina division, Disco supermarkets, plans to content a governmental claim that it owes more the equivalent of more than $100 million (US) in back taxes and fines. There seems to be a strong possibility that this tax case could end up delaying Ahold's planned sale of Disco, which also is part of its strategy of shedding non-core businesses to reduce debt.
KC's View:
Thursday should be a very interesting day for Ahold news, since it also plans to release long-delayed financial results for some of its divisions, including Stop & Shop in New England.

There is a sense, when you talk to people within the industry, that there is another shoe left to drop…and concern about what more bad news might do to the company. There's also a feeling that the bar is pretty high for Moberg's strategic vision, that this is a company that shouldn’t be taking small half-steps as it attempts to return to public respectability.

The situation is complicated, it seems to us, when so much attention is being paid to cutting costs and debt, because it may not be creating an environment in which the company’s various divisions can aggressively do the things necessary to fight off the likes of Wal-Mart.

Tough times, and no easy answers.