A&P and committee ask bankruptcy court to approve global settlement

By Caroline Salls

Pittsburgh, May 11 – The Great Atlantic & Pacific Tea Co., Inc. (A&P) and its official committee of unsecured creditors requested court approval of a global settlement with the majority holders of its senior secured PIK toggle notes due 2017 and its senior secured convertible notes due 2018, according to a motion filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

A&P said the settlement is supported by its unions and pension plans.

The company said the proposed settlement resolves all disputes between the parties, including potential challenges to the secured creditors’ claims and liens and pension plan administrative expense claims.

In consideration for the resolution and waiver of the committee’s potential challenges that were preserved under A&P’s final debtor-in-possession financing order, the secured creditors have agreed to cede $11.25 million in cash collateral and share in proceeds from avoidance actions with the A&P debtors’ estates.

The secured creditors have also agreed to share in the proceeds of a pre-bankruptcy cause of action with the pension plans, with 5% of the proceeds, not to exceed $1.5 million, to be distributed to the pension plans.

In addition, the secured creditors have agreed to share 5% of the value of tax savings with the pension plans to the extent A&P files a Chapter 11 plan that provides for the continued operation of its liquor stores by the reorganized debtors and the preservation of net operating loss carryforwards.

Finally, the secured creditors agreed to support a substantial contribution claim of the United Food and Commercial Workers Union, International Union and consent to the payment of $1.5 million in fees and expenses of the attorneys and financial advisors to the unions.

Also under the settlement, A&P will continue making pay downs of the secured creditors’ claims, subject to a modified wind-down budget that will allow for the continued use of cash collateral by the company.

The settlement also resolves litigation between A&P and the pension plans regarding the allowance and amount of the plans’ administrative expense claims, the motion said.

A hearing is scheduled for June 2.

A&P, a Montvale, N.J.-based operator of supermarkets, filed for bankruptcy on July 19, 2015. The Chapter 11 case number is 15-23007.

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