The Penn Traffic Co. filed Friday for bankruptcy for the second time in four years.
By William Kates
Associated Press Writer

SYRACUSE, N.Y. – The Penn Traffic Co., which operates grocery stores in six states, filed for bankruptcy Friday for the second time in four years and said it had arranged for $270 million in financing to help it reorganize.

The Syracuse-based company said it intended to reorganize and emerge from Chapter 11 as quickly as possible. It filed for bankruptcy protection in U.S. District Court in White Plains, N.Y.

“The Chapter 11 filing will give us the flexibility we need to address the financial and operational challenges that have hampered our performance,” said Joseph V. Fisher, the company’s president and chief executive officer.

“We are gratified by the strong support of our lenders, which we view as an important vote of confidence in our company, our people and our potential,” Fisher said.

Fleet Capital Corp. and a syndicate of lenders will provide $270 million in financing, which Fisher said would be sufficient to operate and pay all vendors during the reorganization process.

Penn Traffic has asked for an interim order from the bankruptcy court to immediately access $70 million of that financing, Fisher said.

All the company’s 212 stores remain open and serving customers, Fisher noted.

Unlike 1999 when it filed for bankruptcy with a prearranged reorganization plan, this time Penn Traffic did not offer any specific details about how it will restructure.

Work force cuts, store closings and the sale of some of its divisions are all options that will be reviewed, said Marc Jampole, a company spokesman.

Analysts have said one option that could help turn around the company would be the sale of its Big Bear division.

Penn Traffic said earlier this month that it was considering a Chapter 11 filing after several deadlines passed for it to submit its annual report to the U.S. Securities and Exchange Commission.

As a result of the company’s failure to provide an annual report, Nasdaq on Friday removed the company from its listings. Its stock, which over the past year had been as high as $10.88 a share, closed at 32 cents a share Thursday.

Last week, some of Penn Traffic’s major vendors cut off shipments, fearful of the company’s bankruptcy talk.

In its filing, Penn Traffic listed total assets of $742 million and total liabilities of $678 million, as of the fiscal year ended Feb. 1, 2003. The company lost $2.5 million in the first three quarters of its current fiscal year.

Fisher said Penn Traffic has been a victim of fierce competition, stagnant food prices and a weak economy and rising employee benefit costs, which have combined to erode company profits.

Fisher called the reorganization a “chance to make a fresh start and reposition Penn Traffic for the future.”

Penn Traffic has named Steven G. Panagos as its Chief Restructuring Officer to guide the reorganization, Fisher said. Panagos is a New York City-based financial consultant on restructuring.

Penn Traffic lost more than $324 million between 1994 and 1998 before declaring bankruptcy in 1999. In a prearranged plan with creditors, the company closed more than four dozen stores and shed $1.13 billion in debts by selling them majority ownership.

The company spent more than $185 million over the next few years revamping its old stores and building new ones. It also introduced new promotional programs to generate business.

Although Penn Traffic ended fiscal 2002 with a loss of $95.7 million, revenues climbed by 2 percent to $2.4 billion and same store sales grew for the year and the company appeared on the rebound.

Penn Traffic owns and operates supermarkets in upstate New York, Ohio, West Virginia, Pennsylvania, Vermont and New Hampshire under the Big Bear, Big Bear Plus, Bi-Lo, Quality, and P&C names. It also operates wholesale food distribution businesses serving 80 licensed franchises and 66 independent operators.

It employs 16,000 people in six states, about one-third of those in New York.

AP-ES-05-30-03 1628EDT

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