A&P files Chapter 11 plan on $490 million debt and equity investment

By Caroline Salls

Pittsburgh, Nov. 14 - The Great Atlantic & Pacific Tea Co., Inc. (A&P) filed its plan of reorganization and related disclosure statement Monday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, A&P has entered into an agreement to receive $490 million of debt and equity financing from private investors The Yucaipa Cos. LLC, Mount Kellett Capital Management LP and investment funds managed by Goldman Sachs Asset Management, LP.

Investment details

According to the disclosure statement, the $490 million new-money commitment will come in the form of $210 million face amount of privately placed new second-lien notes, $210 million face amount of privately placed new convertible third-lien notes and an $80 million new equity investment.

The $210 million face amount of new second-lien notes will be issued with a 5% original issue discount. As a result, the total amount of those securities includes $200 million of funds from the issuance, not $210 million, the disclosure statement said.

A&P said the proceeds of the commitment will allow it to make plan distributions, including paying secured creditors in full in cash, and will provide a $40 million cash pool for distributions to general unsecured creditors.

The company said in a Nov. 3 news release that the agreement would enable it to complete the restructuring of its balance sheet and emerge from Chapter 11 as a private entity in early 2012.

Creditor treatment

Treatment of creditors will include:

• Administrative claims, debtor-in-possession facility claims, priority tax claims, secured tax claims and other priority claims will be paid in full in cash;

• Holders of second-lien notes claims will either be paid in full in cash plus interest or receive replacement second-lien notes equal to the value of their claims;

• Other secured claims will either be reinstated or holders will be paid in full in cash or receive the collateral securing their claims;

• Holders of convertible notes claims, 9 1/8% senior notes claims, general unsecured claims and quarterly interest bond claims will share in the $40 million unsecured creditor cash pool;

• Holders of trade claims will receive a share of the unsecured creditor cash pool, and, if they enter into acceptable trade agreements, they will receive a share of a trade claims cash pool;

• Holders of guaranteed landlord claims will receive a share of the unsecured creditor cash pool, and, if they vote to accept the plan, they will receive a share of a substantive consolidation settlement cash pool;

• Union claims will be paid in accordance with a union settlement agreement;

• Holders of intercompany claims and intercompany interests will receive no distribution, but these claims and interests may be reinstated at the debtors' discretion;

• Holders of Section 510(b) claims will receive no distribution; and

• Interests in A&P will be cancelled.

A&P, a Montvale, N.J.-based operator of supermarkets, filed for bankruptcy on Dec. 12, 2010. Its Chapter 11 case number is 10-25459.

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