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Following months of speculation on its financial status, Fairway Group Holdings Corp., parent company of Fairway Market, this week filed a joint prepackaged Chapter 11 plan of reorganization and voluntary petitions for protection under Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York.
The New York metro-area grocer said it “intends to use the Chapter 11 process to facilitate a financial restructuring designed to restore Fairway to long-term financial health while continuing to operate in the normal course of business without interruption.”
In a statement, Fairway Group Holdings CEO Jack Murphy said: “We believe that implementing this prepackaged plan is the best opportunity for Fairway to restructure its balance sheet on an expedited basis, strengthen its operations, retain jobs and create long-term value, while continuing to provide customers with the best food experience in the greater New York area."
The chain has come to an agreement with its senior secured lenders holding more than 70 percent of the company’s senior secured debt on a reorganization that aims to eliminate about $140 million of senior secured debt and provide financing to restructure the grocer’s balance sheet.
Under the prepackaged plan, holders of general unsecured claims, among them suppliers, employees, unions and all other trade creditors, will receive full payment in the ordinary course of business, while the five collective bargaining agreements between Fairway and various unions will be assumed under the plan and remain in effect. All of the company's existing equity securities, including its shares of common stock, will be cancelled, according to the plan.
As part of the plan, Fairway entered into an agreement with certain holders of its senior secured loans, under which they agreed to exchange their loans for common equity and other consideration. All other prepetition creditors will be paid in in the ordinary course of business.
In tandem with the filing, the grocer is seeking approval to enter into a $55 million superpriority secured debtor-in-possession (DIP) credit facility, which will be provided by some of the company’s existing senior secured lenders. The proposed financing should help support the reorganization and enable business as usual.
The chain has also secured a commitment from its current lenders to convert the amounts extended under the DIP loan to an exit loan, and filed a number of customary first-day motions to support continuing operations.
Fairway operates 15 stores in New York, New Jersey and Connecticut.