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Court Approves Disclosure Statement for Penn Traffic Reorganization

SYRACUSE, N.Y. -- The Penn Traffic Co. received approval of its first amended reorganization plan that was filed on Dec. 23, 2004, from the U.S. Bankruptcy Court.

As such, the company will commence its solicitation of votes from its creditors, followed by a confirmation of the first amended reorganization plan at a hearing scheduled for March 17. Penn Traffic filed for chapter 11 protection on May 30, 2003 and says it expects to emerge from Chapter 11 by the end of March with significantly reduced debt and its core business intact, including 109 supermarkets, its wholesale/franchise business and the Penny Curtiss Bakery.

Robert Chapman, president and c.e.o. of Penn Traffic, said the approval of the disclosure statement "is another key achievement in Penn Traffic's restructuring process. We are committed to having our plan of reorganization confirmed in the near future, which will complete the chapter 11 process and enable Penn Traffic to emerge from bankruptcy on strong footing for the future."

Upon consummation of the first amended reorganization plan:

-- Penn Traffic's post-petition secured lenders will be repaid in full, in the approximate amount of $30 million.

-- Holders of allowed unsecured claims in the approximate aggregate amount of $295 million will receive their pro rata share of 100% of the newly issued common stock of reorganized Penn Traffic, subject to dilution in respect of new common stock that may be issued to management of reorganized Penn Traffic.

-- Penn Traffic's existing common stock will be cancelled.

-- Up to 10% of the newly issued common stock in Penn Traffic will be reserved for issuance pursuant to management incentive stock grants.

Cash requirements to satisfy the company's obligations under the plan and its working capital needs going forward will be funded from borrowings under a new $164 million senior secured exit financing facility and the proceeds of a $37 million sale-leaseback transaction with respect to the company's five owned distribution centers located in New York and Pennsylvania.
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