Agway to file for Chapter 11, obtains $125 million DIP facility

New York, Sept. 30 - Agway Inc. said it plans to make a Chapter 11 filing on Tuesday in order to reorganize its obligations and strengthen its balance sheet.

The Syracuse, N.Y. agricultural cooperative also said it obtained a $125 million 18-month debtor-in-possession facility from a group of institutions led by GE Commercial Finance.

Agway's planned Chapter 11 filing will also include its Agway Feed and Nutrition, Agway Agronomy, Seedway, Feed Commodities International, Country Best Produce, CPG Nutrients, Agway CPG Technologies and Agway General Agency units and is expected to be filed in the U.S. Bankruptcy Court for the Northern District of New York in Utica, N.Y.

Excluded from the filing are Agway Energy Products LLC, Agway Energy Services, Inc., Agway Energy Services-PA, Inc. and Telmark LLC. Telmark debenture holders will not be subject to the Chapter 11 filings. Additionally, Agway dealer stores will not be included in the filings because they are separately owned and are not affiliated with Agway Inc. in any way.

Agway said it intends to keep its businesses running normally during the reorganization.

The company will continue its efforts to sell Telmark, Agronomy and Seedway as previously announced and does not plan significant reductions in workforce or plant closings as a result of the Chapter 11 filing.

Agway said its Chapter 11 filing was caused by insufficient cash flow and its debt burden.

While some businesses are doing well, Agway said the company as a whole has not been generating the cash it needs to support the level of debt the company is carrying and that debt has taken on increased significance because of losses during the past three fiscal years. Market conditions, especially in the agriculture sector, continue to be challenging, Agway added. The financial markets and general economy have also presented difficult environments for asset and business sales underway.

The losses have caused Agway to violate financial covenants, the company said in a filing with the Securities and Exchange Commission. Although those violations have been waived and some covenants modified, further violations are "possible and perhaps likely," Agway added.

A restructuring plan has met with "some success" but sales of businesses have been slower than anticipated.

Immediately, Agway said it is not likely to meet covenants at Sept. 30 nor does expect to have funds to meet a $33.1 million maturity of subordinated debt on Nov. 1.

Agway reported a net loss of $98.2 million for the year ended June 30, 2002, including a net loss of $85.4 million directly related to the sale of discontinued operations.

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