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Penn Traffic Files Chapter 11 Reorganization Plan

SYRACUSE, N.Y. - The Penn Traffic Co. says it has filed its plan of reorganization with the U.S. Bankruptcy Court to emerge from Chapter 11 this fall with significantly reduced debt and with its core business intact, including 109 company-operated stores, its wholesale/franchise business, and the Penny Curtiss bakery.

Penn Traffic filed for Chapter 11 protection on May 30, 2003. Upon approval and consummation, highlights of the reorganization plan include:

-- Post-petition secured lenders to be repaid in full in the approximate amount of $26 million;

--Holders of allowed unsecured claims in the approximate aggregate amount of $277 million to receive their pro rata share of 100 percent of the newly issued common stock of the reorganized company;

--Penn Traffic's existing common stock will be canceled;

-- Up to 10 percent 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 will be funded from its excess cash and borrowings under a new secured exit financing facility to be entered into by the company.

Prior to its Chapter 11 filing, Penn Traffic had approximately $337 million in funded debt. It is anticipated that total debt upon the company's expected emergence from Chapter 11 in the fall will be approximately $88 million.

Key elements of the turnaround at Penn Traffic include:

--The sale or closing of unprofitable and noncore operations, including the Big Bear supermarket chain and approximately 37 additional supermarkets;

--Substantial improvements in working capital management through changes in operating philosophy and discipline;

--Implementation of operating cost reductions through overhead reductions and facility consolidations;

-- Implementation of new product, marketing, and distribution initiatives.

--A greatly improved liquidity position, As of the filing, Penn Traffic has paid down approximately $132 million in secured debt and will convert an additional $105 million in funded debt and $172 million in unsecured claims to equity in the reorganized company.

Robert Chapman, president and c.e.o. of Penn Traffic, said: "We are extremely proud of our achievements in restructuring Penn Traffic. The new Penn Traffic will have a solid core of very healthy and competitive supermarkets, and our bakery operations and wholesale/ franchise businesses remain strong. We believe the steps we have taken to improve liquidity and operating performance, and to dramatically reduce our debt, have put Penn Traffic on a strong footing for the future. This achievement is very much a testament to the hard work and dedication of all of the company's employees, as well as the loyal support of our business partners. We are very excited to enter this new phase in Penn Traffic's history."

The retailer saw a profit in June of nearly a half-million dollars, which was the first monthly profit since December and only the second since the parent company of P&C Foods filed for bankruptcy protection.

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