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Bankruptcy judge approves sale of Penn Traffic to Tops
By Bob Niedt / The Post-Standard
January 25, 2010, 5:31PM
Stephen D. Cannerelli / The Post-StandardA Tops Friendly Markets store is located on West Genesee Street in Auburn. More Syracuse stores will sport the Tops sign soon, because federal bankruptcy court Judge Peter J. Walsh approved the sale of Penn Traffic's assets to Tops.
By staff writers Bob Niedt and Mark Weiner
Syracuse, NY -- U.S. Bankruptcy Court Judge Peter J. Walsh has approved the sale of bankrupt The Penn Traffic Co. to Tops Markets, a spokeswoman for Tops said tonight. The approval came just minutes ago.
Walsh told Penn Traffic lawyers he would sign a modified sale agreement when they present it to him around 5 p.m. It is now signed.
Tops officials said the closing on the acquisition of Syracuse-based Penn Traffic will take place by the end of the week.
"We are very pleased that the court has approved our comprehensive bid,'' said Frank Curci, president and CEO of Tops. "We look forward to the upcoming closing and the opportunity to bring the Tops Friendly Markets shopping experience to our new neighbors and customers."
Tops victory will more than double the size of the resurging private grocer. It also marks the end of The Penn Traffic Co., a grocer whose roots go back to 1854, when it started selling groceries to stagecoaches.The Pennsylvania company, growing rapidly through leveraged buyouts, bought P&C Foods in the 1980s. It moved its corporate headquarters to Syracuse and kept different banner names on all of its supermarket divisions.
Today's hearing ended in victory for Tops, but at a higher cost for the Buffalo-based chain: Lawyers say the deal furiously modified in court today means Tops will likely pay more than the $85 million it offered for Syracuse-based Penn Traffic and its 79 supermarkets.
Foreman said outside of court that the Penn Traffic stores would become Tops stores effective with the closing on Friday. He said it will be business as usual as the stores convert to Tops. "It will all be transparent to the consumer," said Foreman.
Throughout the late afternoon, one signed order after another was filed in U.S. Bankruptcy Court records, showing a last-minute flurry of negotiations to get the Tops offer sealed and signed.
Those deals and compromises of claims include those signed off by the Teamsters, C&S Wholesale Grocers, creditors and others were signed by Walsh.
Walsh approved cash borrowing by Penn Traffic to complete transactions, and approval for going-out-of-business sales for the unnamed stores Tops says it doesn't want.
One by one during the hearing hours earlier, lawyers representing interest parties to the agreement went before Judge Peter J. Walsh in U.S. Bankruptcy Court in Wilmington, Del., to say they were on board with the new agreement.
Last-minute dealmaking delayed the start of today's bankruptcy court hearing that decided the future of the remains of Penn Traffic.
Foreman said some all involved in the new agreement expect an upward adjustment of the purchase price after an inventory of the Penn Traffic stores. Foreman said he also believes all of the objections to the final agreement have now been resolved.
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Penn Traffic chat
» Chat transcript: Reporter Bob Niedt on today's Penn Traffic court hearingHe also told the judge the agreement calls for keeping the list of stores to be closed under seal.
Foreman said the deal-closing process would begin Thursday and be concluded by Friday.
Leaseholders will be notified next week about the future of the stores they have agreements with. A schedule also will be filed next week that sets out what reserve fund money will be set aside for particular landlords.
For now, the parties want to keep private which stores will be closed and the number of stores still on the bubble. David Nier, a lawyer for Tops, said it is assumed Tops will pick up the leases for profitable stores and may renegotiate leases for other stores.
At around 12:30 p.m., Foreman was detailing key aspects of the sale agreement. He said the centerpiece is the $85 million cash offer from Tops. In addition, C&S Wholesale Grocers has agreed to reduce claims of more than $25 million. All claims to the estate will be reduced by about $100 million, said Foreman. Under the proposal, said Foreman, all claims against Penn Traffic would be reduced from $300 million to $200 million. That includes a $25 million concession from C&S.
The Tops deal will include the transfer of $10 million cash on hand.
Foreman said the decision on which stores to close "is in a state of movement and will not be firmed-up until closing."
Foreman said there are antitrust issues that also must be reviewed by the Federal Trade Commission before anyone can determine how many stores to close.
Bill Sullivan, a lawyer for the Teamsters pension fund, objected to the list of stores being kept under seal. He said they don't need the list today but would like the information under a confidentiality agreement.
Walsh had no immediate ruling on his objection.
The Post-Standard has learned at least three Penn Traffic stores will close if Tops buys the assets. One of those stores is in Norwich, employees have been told.
As the hearing started, Foreman began by explaining the reason for the delay. "We have been getting comments on a revised sale order throughout the morning," said Foreman. He said the final paperwork is on the way. Foreman said they anticipate that items one and two on the agenda will be adjourned.
Those items include paying some expenses to C&S Wholesale Foods and hiring an outside firm as a business consultant on the sale. They don't directly involve the Tops offer.
During today's hearing, Penn Traffic's lawyer told Walsh said no qualified bids were received since the last hearing. The employee group never submitted anything in writing and notified him they would not attend the court hearing today.
A few Penn Traffic employees had organized a movement to buy Syracuse-based Penn Traffic using a financial advisement firm and an investor from India. The group informed the court in an informal letter that the process was under way. However, there was never a formal bid filed in bankruptcy court by that group. Bids were taken through Jan. 19 for the company's assets.
Penn Traffic filed for Chapter 11 bankruptcy protection from its creditors on Nov. 18. It was the third such filing for the grocer in 10 years. In this filing, Penn Traffic informed the court it wanted to sell all of its assets.
The 68 days that followed that filing were packed with tension and drama for the 5,700 employees of Penn Traffic, as well as its creditors, suppliers, customers and others.
Early court filings and bids showed signs of desperation. The company informed the court it wanted to be out of business completely by mid-February. Filings showed Penn Traffic was bleeding multi-million dollar losses at a frightening pace.
Liquidators stepped in, fronting for an unknown buyer, bidding a lowball $36.5 million company worth easily double that amount.
Schenectady-based Price Chopper came in later in December with a $54 million offer to buy 22 P&C stores, including 13 in the Syracuse area.
That would have left the remainder of Penn Traffic's stores to go to liquidators or other supermarket companies who might have bid on one or just a few of the stores.
Throughout the filing, Tops sources kept insisting a bid from Tops was imminent. It came at the 11th hour as Walsh was close to making a decision Jan. 8 whether Price Chopper would get its wish.
Early that day, hours before the court hearing, Tops filed its bid: $85 million, plus other financial incentives, for all of Penn Traffic. That bid became the lead offer.
However, Tops executives said, some stores -- a handful, the CEO says -- will close.
Employees at the P&C store in Norwich have been told that store is one of three that will close.
