The Great Atlantic & Pacific Tea Co. Inc.(fka GAPTQ)

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A&P Bondholders Balk At Grocer's Bankruptcy Financing
4:35p ET January 4, 2011 (Dow Jones)
A&P Bondholders Balk At Grocer's Bankruptcy Financing

By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW

NEW YORK (Dow Jones)--A group of A&P bondholders is objecting to some of the supermarket chain's bankruptcy financing package, fearful that the agreement "unconstitutionally" diminishes their rights.
The ad hoc group, which owns about 44% of the grocery company's senior 11 3/8% percent notes, says that while it understands A&P needs financing to stay afloat during its Chapter 11 case, the current financing package could harm them too much.
"The debtors have failed to carry their heavy burden of demonstrating that the protection they propose in connection with the priming DIP Financing provides adequate assurance that the Secured Noteholders will be compensated for the diminution in the value of their secured interest," the noteholders say in a court filing.
A&P, officially called Great Atlantic & Pacific Tea Co. (GAPTQ), filed for Chapter 11 protection last month with a massive $800 million debtor-in-possession loan fully underwritten by J.P. Morgan Chase & Co. (JPM) that an A&P lawyer called "remarkable." A judge said at A&P's first-day hearing that the company could tap nearly half that amount in the interim, pending a final hearing.
The secured noteholders say that the J.P. Morgan DIP loan could put them lower on the totem pole than holders of as much as $950.4 million A&P debt, rather than being junior to just $331.7 million of debtholders.
"The secured noteholders are entitled to adequate protection capable of compensating them for this loss," they say in their filing. In essence, the noteholders want a number placed on how much their claims are worth, and how much value those claims are expected to lose. An A&P spokesman didn't immediately respond to a request for comment.
The noteholders also say they aren't getting the same treatment as both the DIP lenders and other secured lenders, including fee payments and access to information about A&P. A hearing on the whether A&P can keep tapping the bankruptcy loan is scheduled for next Monday.
Despite lining up its bankruptcy financing, A&P has little else in place. Many recent bankruptcy filings have been prepackaged or prearranged plans in which companies come to court on day one with support of most or substantially all of their creditors. A&P said last month that one advantage of its debtor-in-possession loan is its 18-month maturity, meaning the company has more time to work on a plan.
Great Atlantic & Pacific Tea operates not only A&P stores but also Waldbaum's, Food Emporium, Food Basics and Pathmark.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler, Dow Jones Newswires; 212-416-2152; [e-mail]

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(END) Dow Jones Newswires
01-04-11 1635ET
Copyright (c) 2011 Dow Jones & Company, Inc.BT201101040074872011-01-04 21:35:00.0005USNS7FT1JNQ1R3E57EBEKUK65DJNF