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SYRACUSE, N.Y - The Penn Traffic Company and its U.S. subsidiaries on Friday filed voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code.
In its filings in the U.S. Bankruptcy Court, the company indicated that it intends to reorganize and emerge from chapter 11 as quickly as possible.
Penn Traffic also announced that it has secured a commitment of a $270 million senior secured debtor-in-possession (DIP) financing facility from Fleet Capital Corporation and a syndicate of lenders that were lenders to the company prior to the filing of the petitions. Penn Traffic expects that the financing will provide it with sufficient financing to operate and pay all vendors during the reorganization process. The company expected to access $70 million of the DIP facility upon court approval on Friday; the full facility is subject to final court approval at a later date.
"The chapter 11 filing will give us the flexibility we need to address the financial and operational challenges that have hampered our performance," said Joseph V. Fisher, Penn Traffic's president and CEO.
The company said its decision to reorganize under chapter 11 was based in part on a decline in its liquidity resulting from Penn Traffic's declining operating performance during the fourth quarter of fiscal 2003 and the first quarter of fiscal 2004.
"The operating environment in the supermarket industry has become more challenging because of a weak economy, a decrease in consumer confidence, a lack of food inflation and the increased penetration of the retail food industry by alternative channels of trade, such as supercenters and limited assortment stores," said Fisher.
Penn Traffic reported that all 212 Penn Traffic stores are open and serving customers.
The company has named Steven G. Panagos chief restructuring officer. Panagos has vast retail experience. As interim CEO of Crown Books, he led that company out of chapter 11, and has also helped numerous other companies with financial restructuring counsel, including Federated Department Stores, Maidenform, Metromedia Fiber Network and Montgomery Ward.
Penn Traffic also announced that Martin A. Fox, executive VP and CFO and a director of the company, has resigned as an officer and director for personal reasons and not as the result of the chapter 11 filing or any other company issue.
In its filing documents, Penn Traffic and its U.S. subsidiaries listed total assets of $742 million of assets at book value and total liabilities of $678 million as of the fiscal year ended Feb. 1, 2003.