A&P Files for Chapter 11 Reorganization to Facilitate Financial and Operational Restructuring
December 12 2010 - 7:27PM
Business Wire
The Great Atlantic & Pacific Tea Company, Inc. (A&P)
(NYSE: GAP) announced today that it has filed a voluntary petition
under Chapter 11 of the U.S. Bankruptcy Code with the U.S.
Bankruptcy Court for the Southern District of New York. The Chapter
11 process will facilitate A&P’s financial and operational
restructuring, which is designed to restore the Company to
long-term financial health.
Stores Fully Stocked and Open with No Interruption in
Service
A&P continues to conduct its business and serve customers at
its 395 stores. The Company’s stores are fully stocked with their
complete range of high quality products, and all existing customer
promotional and customer loyalty programs will stay in place.
The Company will have access to $800 million in debtor in
possession (DIP) financing, which will enable it to continue paying
local suppliers, vendors, employees and others in the normal course
of business.
A&P President and Chief Executive Officer Sam Martin said,
“We have taken this difficult but necessary step to enable A&P
to fully implement our comprehensive financial and operational
restructuring. While we have made substantial progress on the
operational and merchandising aspects of our turnaround plan, we
concluded that we could not complete our turnaround without
availing ourselves of Chapter 11. It will allow us to restructure
our debt, reduce our structural costs, and address our legacy
issues.
Mr. Martin continued, “With the protections afforded by the
Bankruptcy Code and the backing of a new, pre-eminent lender, we
can make strategic decisions that will benefit the Company over the
long term, enabling A&P to emerge with a new capital structure
and in a much improved position to exploit its fundamental
strengths. Importantly, during this reorganization our stores will
operate normally with fully stocked shelves and the excellent
service A&P customers expect. Our customers can shop our stores
with confidence, and our employees can continue delivering great
value and service to our customers every day.”
As the Company implements its financial and operational
restructuring, it intends to continue and accelerate most of the
basic elements of the turnaround plan announced in October,
including:
- A completely new management team is in
place;
- Reducing structural and operating
costs;
- Improving the A&P value proposition
for customers; and
- Enhancing the customer experience in
stores.
A&P’s major shareholders support the action announced today
and believe that the Company’s plan will advance and accelerate the
comprehensive turnaround effort already underway.
The Company also announced that Frederic F. (“Jake”) Brace, who
was named Chief Administrative Officer in August, will lead the
Company’s restructuring effort. Mr. Brace will take the additional
title of Chief Restructuring Officer to reflect his expanded
role.
JPMorgan Chase to Provide $800 Million in DIP
Financing
The Company has entered into an $800 million DIP facility with
JPMorgan Chase & Co. The Company’s ability to obtain borrowings
under such facility is subject to satisfaction of customary
conditions and receipt of court approval. The DIP facility is being
fully underwritten by JPMorgan Chase. A hearing to approve a
portion of the facility has been scheduled for December 13.
Upon approval, this DIP facility will be available to fund
A&P’s operations, pay its vendors and for other corporate
purposes. In addition, this financing will provide the capital
necessary to continue the Company’s efforts to improve and renovate
select stores and provide enhanced product offerings to its
customers.
Employees to Continue to Receive Wages and Benefits
The Company expects to receive full authority to pay employee
wages and benefits on an uninterrupted basis.
Background on Chapter 11
Chapter 11 of the U.S. Bankruptcy Code allows a company to
continue operating its business and managing its assets in the
ordinary course of business. The U.S. Congress enacted Chapter 11
to encourage and enable a debtor business to continue to operate as
a going concern, to preserve jobs and to maximize the recovery of
all its stakeholders.
The Company’s legal representative in its Chapter 11 cases is
Kirkland & Ellis LLP and its financial advisor is Lazard.
About A&P
Founded in 1859, A&P is one of the nation’s first
supermarket chains. The Company operates 395 stores in eight states
and the District of Columbia under the following names: A&P,
Waldbaum’s, Pathmark, Best Cellars, The Food Emporium, Super Fresh
and Food Basics.
This release contains forward-looking statements about the
future performance of the Company, which are based on management's
assumptions and beliefs in light of the information currently
available to it. The Company assumes no obligation to update the
information contained herein. These forward-looking statements are
subject to uncertainties and other factors that could cause actual
results to differ materially from such statements including, but
not limited to: the ability to timely and effectively implement the
turnaround strategy; the ability to access capital and capitalize
on unencumbered and under-encumbered assets; the ability to enter
into sale-leaseback transactions or sell non-core assets; various
operating factors and general economic conditions; competitive
practices and pricing in the food industry generally and
particularly in the Company's principal geographic markets; the
Company's relationships with its employees and the terms of future
collective bargaining agreements; certain actions may require
Bankruptcy Court approval; the risk that the bankruptcy filing and
the related cases disrupt the Company’s current plans and
operations; the costs and other effects of legal and administrative
cases and proceedings; the nature and extent of continued
consolidation in the food industry; capital market conditions that
may negatively affect the Company's cost of capital and the ability
of the Company to access capital; availability of capital to the
Company; supply or quality control problems with the Company's
vendors; and changes in economic conditions that may affect the
buying patterns of the Company's customers.
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