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    Penn Traffic Postpones Hearing, Continues Sale-Leaseback Transaction

    SYRACUSE, N.Y. - The Penn Traffic Co. said it is continuing to explore "the multiple compelling proposals" for a sale-leaseback transaction it has received involving most of its owned stores and distribution center properties which, if consummated, could result in substantial additional funding.

    SYRACUSE, N.Y. - The Penn Traffic Co. said it is continuing to explore "the multiple compelling proposals" for a sale-leaseback transaction it has received involving most of its owned stores and distribution center properties which, if consummated, could result in substantial additional funding.

    The retailer said the sale-leaseback proposals it has received are non-binding indications of interest and any definitive transaction remains subject to execution of binding agreements and other customary conditions, including approval of the U.S. Bankruptcy Court for the Southern District of New York.

    In August, Penn Traffic filed a reorganization plan with the U.S. Bankruptcy Court for the Southern District of New York; a hearing to approve the disclosure statement for the plan was originally scheduled for Sept. 23, 2004, but was rescheduled by the company to Oct. 21 after it had received what the company said is "multiple attractive sale-leaseback proposals."

    The previously filed reorganization plan contemplated that a reorganized Penn Traffic would emerge from Chapter 11 this fall with significantly reduced debt and with its core business intact, including 109 company-operated stores, its wholesale/franchise business and the Penny Curtiss bakery.

    In light of what Penn Traffic described as "progress made to date on the potential sale-leaseback transaction and the significant change" it would have on its capital structure after emerging from Chapter 11, the company said it would postpone the Oct. 21 disclosure statement hearing to give it more time to pursue entering into a binding sale-leaseback agreement within the next few weeks, subject to bankruptcy court approval.

    Should that occur, Penn Traffic said it would file an amended reorganization plan that would include a detailed description of the sale-leaseback transaction and the resulting adjustments to its capital structure. Penn Traffic said its creditors committee and senior secured bank lenders support the postponement of the disclosure statement hearing and the continued pursuit of the sale-leaseback proposals.

    In a statement, Robert Chapman, Penn Traffic's president and c.e.o., said the proposed sale-leaseback transaction "offers many potential benefits...that require continued review and due consideration. The proposals on the table would unlock the intrinsic value," in the company's real estate assets, eliminate the need for any long term debt upon its emergence from bankruptcy and significantly enhance its liquidity, "which will in turn enhance our ability to compete in our core markets.

    Because of these benefits, added Chapman, the company, "with the support of its banks and creditors committee, has decided to postpone this week's bankruptcy court hearing to continue to explore these very compelling proposals. We remain fully committed to the successful restructuring of Penn Traffic on a timely basis."

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