A&P looking to raise capital, up liquidity in light of 2011 maturities

By Jennifer Lanning Drey

Portland, Ore., July 23 - Great Atlantic & Pacific Tea Co. Inc. is exploring capital-raising opportunities in an effort to augment its current liquidity position and prepare for its 2011 debt maturities, Brenda Galgano, A&P's chief financial officer, said Friday during a company conference call.

"We continue to assess our liquidity position in light of our 2011 debt maturities and are focused on cash-generating initiatives," Galgano said.

The CFO said the company is considering incremental financing through its current bank facility using its over-collateralized asset base, sale-leaseback transactions and non-core asset sales.

"We expect transactions such as these to improve liquidity, giving us the necessary runway to implement our turnaround [plan] and address our 2011 maturities," she said.

A&P also announced Friday that its board of directors has appointed Sam Martin as the company's new chief executive officer. Martin will succeed Ron Marshall, who has left the company.

A&P had $253 million of liquidity at the June 19 end of the first quarter. The figure was comprised of $183 million of availability under its credit agreement and short-term investments of $70 million.

The company had net debt of $1.4 billion at the end of the first quarter, which included capital leases and real-estate liabilities. The net debt position was $98 million higher than at the end of the prior quarter, Galgano said.

Free cash flow of negative $51 million contributed to the increase in net debt, she said.

Galgano later said she believes proceeds from sale-leaseback transactions could generate more than $100 million.

Comprehensive turnaround plan

A&P's capital raising efforts are one of four key elements of a comprehensive operational and revenue-driven turnaround plan, Christian Haub, its executive chair, said during the call.

The plan also aims to improve A&P's value proposition through merchandising, enhance the customer experience and lower structural and operating costs.

"The turnaround is designed to generate sustained profitability and cash flow, drive sales growth, restore competitive margins to the business and strengthen the foundation of the company for the long term, Haub said.

First-quarter sales decline

A&P posted first-quarter sales of $2.6 billion versus sales of $2.8 billion in the comparable prior-year period.

Comparable-store sales dropped by more than 7%.

Excluding non-operating items, adjusted EBITDA was $19 million in the first quarter, compared with $81 million in the same period of the prior year.

"We are clearly disappointed with our first-quarter results, but we are confident that we now have the right leadership in place to drive our comprehensive operational revenue-driven turnaround to enhance the company's competitive position," Haub said.

A&P is a retail food company based in Montvale, N.J.

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