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A&P confirmation pushed again

by Aviva Gat | Published February 14, 2012 at 1:17 PM

Grocery store operator Great Atlantic & Pacific Tea Co. has delayed its confirmation hearing while it finalizes its exit financing.

The Montvale, N.J., company was set to appear before Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York in White Plains to seek confirmation twice last week, on Feb. 6 and Feb. 9, but both hearings were adjourned because A&P has yet to finalize the terms of its exit financing, according to A&P spokeswoman Marcy Connor.

"While we remain committed to exiting Chapter 11 as soon as possible, it was premature for us to return to court last week," Connor said in an e-mail. She did not respond to a request to elaborate on what remains to finalize, but court papers did not specify the interest rate on one portion of the financing.

Documents show that A&P will again request confirmation on Thursday, Feb. 16.

A&P has lined up $750 million in exit financing, comprising a $400 million senior secured asset-based revolving credit facility and a $350 million senior secured term loan. Drain approved the loan on Jan. 24.

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 is syndication agent.

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.

A&P previously 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 a 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 filed for bankruptcy on Dec. 12, 2010. Documents show A&P hopes to exit bankruptcy by March 1.

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.

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.

Edward Weisfelner and Daniel Saval of Brown Rudnick LLP represent second-lien lenders. Stuart Erickson, Morgan Suckow, Rob Cilento and Dina Model of Miller Buckfire & Co. LLC are financial advisers to the group.

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