Penn Traffic Completes Sale of Wholesale Business to C&S

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Penn Traffic Completes Sale of Wholesale Business to C&S

The Penn Traffic Co. has amended its existing credit agreements and closed the sale of its wholesale business segment and related accounts receivable to C&S Wholesale Grocers, Inc., which was first reported last week.

The regional grocer will complete the pay down of $32 million, or 62 percent of its outstanding funded debt, by its fiscal year end, using proceeds from the transaction as well as from two recently sold stores. Specifically, the Penn Traffic will pay down its $17 million revolving line of credit to zero and about $15 million of the company's $25 million supplemental real estate facility. The company's $6 million term loan, however, will remain outstanding. According to Penn Traffic, these actions will considerably improve availability in excess of outstanding letters of credit.

The company's lenders have agreed to amendments and waivers to the existing credit agreements and provided the necessary consent to allow Penn Traffic to complete the all-cash transaction and debt pay down. The grocer has also secured a new extension, through April 2010, of its existing working capital revolver and supplemental real estate facility, which maintain the existing pricing structure.

"Penn Traffic enters the new year as a renewed company, squarely focused on our P&C, Quality, and BiLo banners, and the consumers they serve," said company president and c.e.o. Gregory J. Young. "I am confident that today Penn Traffic is a stronger company with a brighter future than it had one year ago. Our work continues. Our team is committed to rebuilding the company during what may be the most challenging recession our industry, communities and customers have faced in generations. The wholesale divestiture and debt reduction we've just completed are the latest steps forward, and demonstrate the actions we continue to take as part of our strategy to rebuild the company, restore profitability, and position Penn Traffic for long-term success."

Over the past 18 months the company has cleared up many of its legacy legal and regulatory issues, shed its money-losing Penny Curtiss commercial bakery division, and slashed corporate administrative expenses. The company says it's still evaluating its retail store portfolio and plans to invest in remodels, renovations, and expansions of some of its top-performing and highest-potential stores, although it didn't provide a time line for these changes.

Syracuse, N.Y.-based Penn Traffic owns and operates 91 supermarkets in upstate New York, Pennsylvania, Vermont and New Hampshire under the P&C, Quality, and BiLo banners.