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    Fleming May Try to Keep Core-Mark

    Partial debt payment will clear the way to reorganization, according to reports.

    DALLAS -- Bankrupt distributor Fleming Cos. hopes to survive as a scaled-down provider to convenience stores, according to lawyers in the case, the Associated Press reported.

    The Lewisville, Texas-based company, however, is continuing to explore the possible sale of its last remaining operating division, Core-Mark International Inc.

    Today the company and its creditors will give a federal bankruptcy judge in Wilmington, Del., a plan to pay Fleming's banks $325 million of the approximately $600 million they are owed. Lawyers for both sides said they expect U.S. Bankruptcy Chief Judge Mary F. Walrath to sign an order approving the payment, the Associated Press reported.

    "This clears the way for us to get the plan going, reorganize Core-Mark and get it out of bankruptcy. That's the goal of the unsecured creditors,'' said Robert Hertzberg of the Pepper Hamilton law firm, co-counsel for Fleming's creditors.

    The partial payment to the banks also will save the company interest payments of nearly $1 million a month, Hertzberg said.

    One of Fleming's lawyers said the company still hoped to emerge from the Chapter 11 proceedings with its convenience-store supply division intact.

    "We do not believe that Core-Mark will be liquidated,'' said Geoffrey Richards of Kirkland & Ellis, according to the news report. "Core-Mark has a very strong, viable ongoing business and it will continue to operate. Core-Mark has certainly been the healthiest of the company's three divisions."

    Fleming continues to solicit bids for Core-Mark, but no decision has been made whether to sell the San Francisco-based unit, a spokeswoman said.

    Fleming has already sold its main business, a wholesale grocery supply operation, and a retail division that once operated more than 100 discount grocery stores. The company acquired Core-Mark last year in a bid to expand its reach into the convenience-store market.

    Fleming was once among the nation's largest distributors of food and other supplies to stores. The company filed for Chapter 11 bankruptcy protection April 1, soon after cutting ties to its biggest customer, Kmart Corp., according to the Associated Press.

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