A&P Confirmation Hearing Begins As Company Sorts Objections (2/06/12)
WHITE PLAINS, N.Y. -(Dow Jones)- Great Atlantic & Pacific Tea Co. (GAPTQ) on Monday laboriously moved closer to final approval of its plan to exit what has been an equally laborious bankruptcy, with the company continuing to satisfy objections and a judge beginning to overrule others.
Judge Robert D. Drain of the U.S. Bankruptcy Court in White Plains, N.Y., shot down an argument from a pension fund that represents employees of A&P-owned Super Fresh Food Markets Inc. and that thinks its claim of at least $73 million should be treated better.
Drain told lawyers for the pension fund that he couldn't approve their request to allow the bankruptcy to be confirmed without dealing with the claim, citing the risk that a group led by supermarket mogul Ron Burkle's Yucaipa Cos. could walk away from the $490 million debt and equity financing that forms the backbone of A&P's bankruptcy exit.
"I have unrebutted testimony that the debtor will likely face liquidation" if the investment commitment falls apart, Drain said, emphasizing the risk that holding up the case could trigger a clause that allows the Burkle group to walk away.
Testifying earlier Monday, Lazard Ltd. (LAZ) managing director Stephen Goldstein said that his time working with A&P has led him to believe that without the Burkle money, "clearly there would be no prospects for organization."
Dina Gielchinski, a lawyer for a creditor called Riverside Claims LLC that thinks some elements of the plan treat it unfairly, grilled Goldstein about whether in his experience at Lazard a company is better off being subject to a bidding war or, in the alternative, "collusion." Drain at that point cut off Gielchinski, whose group argues against a piece of the plan that "substantively consolidates" the case, in other words paying unrelated creditors from one pool of money.
The hearing is scheduled to continue Tuesday after a Monday filled with the settling of several objections.
One of those parties, Grocery Haulers Inc., agreed to change their vote on A&P's plan to "yes" after previously voting it down. Still, several objections remain, including ones from investment firms, unions and others.
If approved by Drain, A&P's plan will repay secured lenders in full, with about $40 million left over for the unsecured creditors. Ownership interests in A&P would be canceled, and shareholders wouldn't receive any payment under the plan.
The plan also maintains 34 new collective-bargaining agreements A&P struck with the United Food and Commercial Workers International Union and about a dozen of its local unions late last year. A&P said the "myriad changes" to wages, benefits and working conditions in the agreements help it slash costs and position it to emerge from bankruptcy "as a leaner, more cost-competitive grocer."
Since it filed for bankruptcy protection Dec. 12, 2010, the Montvale, N.J., company has shed some stores and also cut by 5,000 its work force, which stood at around 40,000 the day it filed. The company has also renegotiated those union contracts and reworked leases at some of the stores it plans to keep open.
Drain last month approved a $750 million exit financing package for A&P from J.P. Morgan Chase and Credit Suisse.
Aside from A&P and Super Fresh, A&P operates Waldbaum's, Food Emporium and Pathmark stores. The company started in 1859 with one store on the corner of Vesey and Church streets in Lower Manhattan.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)
Copyright © 2012 Dow Jones Newswires
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