A&P files Chapter 11 bankruptcy to restructure finances, operations

By Caroline Salls

Pittsburgh, Dec. 13 - The Great Atlantic & Pacific Tea Co., Inc. (A&P) filed Chapter 11 bankruptcy Sunday in the U.S. Bankruptcy Court for the Southern District of New York to facilitate its financial and operational restructuring, according to a company news release.

A&P said the restructuring is designed to restore it to long-term financial health.

The company said it continues to conduct its business and serve customers at its 395 stores.

In conjunction with the filing, the company will have access to $800 million of debtor-in-possession financing from JPMorgan Chase & Co., which will enable it to continue paying local suppliers, vendors, employees and others in the normal course of business.

"While we have made substantial progress on the operational and merchandising aspects of our turnaround plan, we concluded that we could not complete our turnaround without availing ourselves of Chapter 11," A&P president and chief executive officer Sam Martin said in the release.

"It will allow us to restructure our debt, reduce our structural costs and address our legacy issues.

"With the protections afforded by the Bankruptcy Code and the backing of a new, pre-eminent lender, we can make strategic decisions that will benefit the company over the long term, enabling A&P to emerge with a new capital structure and in a much improved position to exploit its fundamental strengths."

Turnaround plan

As A&P implements its restructuring, it plans to continue and accelerate most of the basic elements of the turnaround plan announced in October.

Under this plan, a completely new management team is in place, structural and operating costs will be reduced, A&P will improve its value proposition for customers and the in-store customer experience will be enhanced.

A&P said its major shareholders support the bankruptcy filing.

Debt details

According to court documents, A&P had $2.531 billion of assets and $3.211 billion of debt as of Sept. 11.

The company's largest unsecured creditors include:

• Indenture trustee Wilmington Trust Co., with a $229 million claim for the company's 6¾% unsecured convertible senior notes due 2012, a $200 million claim for 9 3/8% unsecured quarterly interest notes due 2039, a $165 million claim for 5 1/8% unsecured convertible senior notes due 2011 and a $12.84 million claim for 9 1/8% unsecured senior notes due 2011;

• McKesson Drug Co. of San Francisco, with a $15.12 million trade debt claim;

• Haddon House Food Products of Medford, N.J., with a $10.61 million trade debt claim;

• Coca-Cola Enterprises of Boston, with a $7.1 million trade debt claim;

• Frito-Lay Inc. of Pittsburgh, with a $4.53 million trade debt claim;

• Nabisco Biscuit Co. of East Hanover, N.J., with a $3.98 million trade debt claim;

• Pepsi-Cola-Hasbrouck Heights of Chicago, with a $3.17 million trade debt claim;

• Nestle DSD Co. Ice Cream of Glendale, Calif., with a $2.16 million trade debt claim;

• Entenmann's Bakery of Pittsburgh, with a $2.15 million trade debt claim; and

• Pepsi-Cola Bottling Co. of New York Inc. of Bronx, N.Y., with a $1.73 million trade debt claim.

The company's preferred shareholders include Christian W.E. Haub, Erivan Karl Haub, Karl-Erivan Warder Haub, Tengelmann Warenhandelsgesellschaft KG and Yucaipa Cos. LLC.

The largest common stockholders include those preferred shareholders as well as Alethia Research & Management, Gamco Investors, Inc., Bank of America Corp. and DBD Cayman Ltd.

Management change

In addition, chief administrative officer Frederic F. "Jake" Brace will take the additional title of chief restructuring officer.

The company's legal representative in its Chapter 11 cases is Kirkland & Ellis LLP, and its financial adviser is Lazard.

Great Atlantic & Pacific Tea is a Montvale, N.J.-based operator of supermarkets. Its Chapter 11 case number is 10-25459.

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