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SYRACUSE, N.Y. -- A federal judge confirmed Penn Traffic's reorganization plan yesterday, giving the regional retailer here the green light to emerge from its two-year chapter 11 bankruptcy.
"Today's confirmation represents a new beginning for Penn Traffic," said Robert Chapman, president and c.e.o. of Penn Traffic, in a statement. "We are extremely pleased with the court's decision and the support we have received from our creditors during this critical time. Looking ahead, we are encouraged by the company's prospects. Penn Traffic will emerge from chapter 11 with a solid financial platform, a core of healthy and competitive supermarkets, and strong bakery and wholesale/franchise operations. We believe Penn Traffic possesses the key resources necessary to maintain a strong, competitive position in the industry, as well as a sound financial future."
Under its reorganization plan, Penn Traffic will repay in full approximately $30 million to $40 million to its post-petition secured creditors for any outstanding bills for goods and services. The company will cancel its existing 20 million shares of common stock and issue new stock to unsecured creditors, who have claims totaling up to $305 million.
Penn Traffic will borrow $164 million to help cover operations and capital needs.
In addition, Penn Traffic will sell its five distribution centers in New York and Pennsylvania to Equity Industrial Partners Corp. in a sale-leaseback transaction for $37 million. Equity Industrial will lease the distribution centers back to Penn Traffic for an initial term of 15 years, with four consecutive five year options to renew the lease.
Penn Traffic said that the exit financing facility, together with the $37 million proceeds of the sale-leaseback transaction and cash generated by the business, will provide sufficient liquidity to make its cash payments and to operate after emergence from chapter 11.
Penn Traffic currently operates 109 supermarkets in New York, Vermont, New Hampshire, and Pennsylvania, under the banners P&C Foods, Quality Markets, and BiLo. It has about 9,000 employees.