Eagle Food Centers files Chapter 11

By Carlise Newman

Chicago, April 7 - Eagle Food Centers Inc. said it made a voluntary Chapter 11 filing in the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago. The company said it will begin negotiations with noteholders on restructuring the company's debt, and has received commitments for $40 million in debtor-in-possession financing from Congress Financial Corp. Eagle said it is also considering sale alternatives.

The company said that the DIP financing will provide continued funding of obligations to employees and suppliers, as well as other day-to-day operations of the company. Its current capital structure includes a $50 million revolving credit facility, of which $26 million is outstanding; an $85 million bond issue of 11% senior notes due 2005, of which $64 million is outstanding; and 3.1 million shares of common stock.

"Over the past two and a half years, we have made excellent progress in improving and strengthening the operating side of the business. We have significantly reduced corporate overhead and overall operating costs. Unfortunately, our cash constraints have made it increasingly difficult to service the company's high-yield debt obligations. We will need to make additional sacrifices and create an appropriate capital structure that will enable our company to be competitive in today's environment," said Robert J. Kelly, chairman and chief executive officer.

During the reorganization process, the company will continue negotiations with representatives of its employee labor unions to renew and modify various terms of their collective bargaining agreements. The company said it will continue to honor existing agreements during the negotiations.

Eagle owns and operates 61 supermarkets in Illinois and Iowa and is based in Milan, Ill.

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