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Fairway Group Holdings Corp. has received approval from U.S. Bankruptcy Court this week for a reorganization plan that will cut the upscale grocery chain's funded debt in half, according to a published report. New York-based Fairway filed for Chapter 11 bankruptcy protection last month.
The plan slashes the company’s funded debt by $140 million, leaving it with about $50 million in cash to continue operations during the bankruptcy process. Fairway’s 4,000 employees will keep their jobs, and unionized workers’ collective-bargaining agreements won’t change.
Fairway’s lawyer, Sunny Singh, told The Wall Street Journal that the grocer hoped to emerge formally from bankruptcy within two weeks.
Following a leveraged buyout by Westport, Conn.-based private equity firm Sterling Investment Partners, Fairway began opening stores beyond New York City, growing to 15 stores with some locations in suburban New York, New Jersey and Connecticut, and went public in 2013. The debt the company incurred while expanding led to its current financial woes, the Journal reported, adding that Fairway expects that the restructuring and lower debt payments will enable it to make technology and marketing investments to help it compete against the likes of Whole Foods Market and Trader Joe’s.
According to the newspaper article, Fairway’s senior lenders will take the grocer private, trading debt for ownership of the restructured company, while other creditors, among them trade vendors, employees and landlords, will be repaid in full. Existing equity, including Sterling’s stake, will be wiped out.
Creditors voted unanimously to approve the reorganization, the Journal noted, citing court papers.