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Judge Approves $750 Million Bankruptcy Exit Financing For Grocer A&P

By Joseph Checkler, Of DOW JONES DAILY BANKRUPTCY REVIEW

WHITE PLAINS, N.Y. -(Dow Jones)- A judge Tuesday moved Great Atlantic & Pacific Tea Co. (GAPTQ) one step closer toward exiting its complicated bankruptcy by approving a $750 million financing package for the owner of the A&P grocery chain.

Judge Robert D. Drain of U.S. Bankruptcy Court in White Plains, N.Y., approved the $400 million revolving loan and $350 million term loan from J.P. Morgan Chase & Co. (JPM) and Credit Suisse AG (CS, CSGN.VX), without which A&P said its exit from Chapter 11 would be "uncertain."

"This was the best available option," said Kirkland & Ellis LLP'sRay C. Schrock, an A&P lawyer, who said nine different parties submitted exit-financing offers.

J.P. Morgan itself will fund $75 million of the revolving loan, Credit Suisse will put in $25 million, and the rest will be syndicated to other lenders. That process is under way, Schrock said Tuesday.

The money is a linchpin of A&P's bankruptcy-exit proposal, a final hearing on which is set for next month. Drain approved a procedural motion Tuesday that allows A&P the exclusive right to file its own bankruptcy plan without rival offers through the middle of June, just in case its current proposal falls apart.

Drain also said A&P could close an additional 14 of its stores, bringing the number of stores it has closed or plans to close to near 50. The company, which also operates Waldbaum's, SuperFresh, Food Emporium and Pathmark stores, had more than 300 when it entered bankruptcy in late 2010. Schrock said the additional 14 are stores that weren't just underperforming, but also had dim prospects of recovering. Retail liquidation company Gordon Brothers Group LLC will advise Pathmark on the going-out-of-business sales, as it did when Drain approved the closure of more than 30 stores in the first quarter of 2011.

A&P's restructuring plan, which is now in the hands of creditors who will vote on it, is based on $490 million debt and equity financing from a group led by supermarket mogul Ron Burkle'sYucaipa Cos. A&P's official committee of unsecured creditors in a Monday filing said it supports the plan, although some objections are rolling in from other parties. A&P's plan will repay secured lenders in full, with some money left over for the unsecured creditors.

Since it filed for bankruptcy protection Dec. 12, 2010, A&P has shed the 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 its union contracts and reworked leases at some of the stores it plans to keep open.

A&P, which is based in Montvale, N.J., started as a company 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.)

-By Joseph Checkler, Dow Jones Newswires; 212-416-2152; joseph.checkler@ dowjones.com

  (END) Dow Jones Newswires
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