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A&P wins approval for $750M in exit financing

by Aviva Gat  |  Published January 25, 2012 at 2:52 PM
Supermarket operator Great Atlantic & Pacific Tea Co. is free to tap all the funds it will need to check out of Chapter 11.

Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York in White Plains on Tuesday, Jan. 24, approved $750 million in exit financing, comprising a $400 million senior secured asset-based revolving credit facility and a $350 million senior secured term loan, according to A&P spokeswoman Marcy O'Connor. No order had been entered as of Wednesday morning.

J.P. Morgan Chase Bank NA and Credit Suisse Securities (USA) LLC are arranging the loans and have committed $75 million and $25 million, respectively, for the revolver. J.P. Morgan will be the administrative agent for the loans, while Credit Suisse will be syndication agent.

A&P had been looking to secure the exit facility since November, according to the motion. Nine institutions submitted proposals to A&P and investment banker Lazard.

The loans will mature five years after closing. The term loan will be subject to quarterly amortization of the principal, with 1% of the principal payable each year.

The revolver will bear interest at an alternative base rate plus 1.5% or adjusted LIBOR plus 2.5%. The margin on the term loan was not specified in court papers. ABR is the highest of prime, the federal funds rate plus 0.5% and adjusted LIBOR plus 1%.

The revolver has a 0.5% unused commitment fee and a 0.125% fronting fee for letters of credit.

The loans also have several other fees that the court has agreed to keep under seal.

Drain on Tuesday also approved going-out-of-business procedures for 14 of A&P's locations, O'Connor said.

According to documents filed Jan. 9, the store closures are part of an overall restructuring, and the 14 stores were chosen based on their profitability and position in the debtor's operations. The stores -- seven New York locations, five in New Jersey, one in Connecticut and one in Pennsylvania -- do not fit into the supermarket chain's long-term business plan.

The procedures mirror liquidation procedures for other locations approved by the court on March 10. A&P had sought to conduct GOB sales at 32 stores on Feb. 15. Those stores were closed April 15 and their contents emptied by April 30.

The Montvale, N.J., company is next set to appear in court on Feb. 6 to request confirmation of its reorganization plan. Before arranging the $750 million in exit financing, A&P had already secured $490 million in debt and equity financing from private equity firm Yucaipa Cos. LLC, hedge fund Mount Kellett Capital Management LP and investment funds managed by Goldman Sachs Asset Management LP. Drain approved the financing on Nov. 14.

Under the securities purchase agreement, the new investors will buy $210 million in second-lien notes, $210 million in convertible third-lien notes and $80 million in new shares. Documents show the second-lien notes will be issued with a 5% original issue discount. The aggregate amount of the investor securities, therefore, includes $200 million from issuance of the second-lien notes.

In return, the investors will receive all of A&P's equity. A&P said the proceeds will provide for payment in full of all of its secured creditors and provide $40 million for general unsecured creditors. According to A&P's schedules, the debtor owes more than $1 billion to the creditor class.

Founded in 1859, A&P operates stores under the A&P, Waldbaum's, Pathmark, Best Cellars, Food Emporium, Superfresh and Food Basics names. When it filed for bankruptcy on Dec. 12, 2010, A&P had 395 stores in eight states. Today, A&P operates 336 stores in seven states.

A&P listed $2.53 billion in assets and $3.21 billion in liabilities in court papers.

James Sprayregen, Paul Basta, Ray Schrock and James Mazza Jr. of Kirkland & Ellis LLP are debtor counsel. Hilco Real Estate LLC is A&P's real estate consultant.

David Kurtz of Lazard in New York is A&P's investment banker. Michael Sullivan and Hugh Sawyer of Huron Consulting Group Inc. in New York and Atlanta, respectively, are the supermarket chain's crisis managers.

Davis Polk & Wardwell LLP represents J.P. Morgan and Credit Suisse.

Kristopher Hansen, Jayme Goldstein and Marianne Mortimer of Stroock & Stroock & Lavan LLP in New York represent Mount Kellett and the Goldman Sachs funds.

Robert Klyman of Latham & Watkins LLP is counsel to Yucaipa.

Dennis Dunne and Abhilash Raval of Milbank, Tweed, Hadley & McCloy LLP in New York are counsel to A&P's official committee of unsecured creditors. Michael Eisenband, Steven Simms and Samuel Star of FTI Consulting Inc., also in New York, are the committee's financial advisers.
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Tags: bankruptcy | Great Atlantic & Pacific Tea Co. | Marcy O'Connor | Robert D. Drain | supermarkets

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Aviva Gat

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