Attached files
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| EX-99.1 - PENN TRAFFIC CO | v164722_ex99-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): October 30, 2009
THE
PENN TRAFFIC COMPANY
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
(State
or Other Jurisdiction
of
Incorporation)
|
0-8858
(Commission
File Number)
|
25-0716800
(IRS
Employer
Identification
No.)
|
1200
State Fair Boulevard
Syracuse,
New York 13221-4737
(Address
of Principal Executive Offices) (Zip Code)
(315)
453-7284
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below):
|
¨
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR240.14d-2(b))
|
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¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
1.01. Entry into a
Material Definitive Agreement.
The
Company is a party to that certain Credit Agreement, dated April 13, 2005 (as
amended and to date, and including the “Credit Agreement”),
by and among The Penn Traffic Company, Penny Curtiss Baking Company, Inc. and
Big M Supermarkets, Inc., as borrowers (the “Borrowers”), the
other credit parties signatory thereto, General Electric Capital Corporation
(the “Agent”),
as agent for the lenders, and the lenders signatory thereto from time to
time. A copy of the Credit Agreement is attached as Exhibit 99.1 to
the Company’s Current Report on Form 8-K, filed on September 12, 2006, and all
amendments to the initial Credit Agreement have been previously
filed.
On
October 30, 2009, the Agent notified the Company that because of alleged
overstatements of the value of certain machinery and equipment in the Company’s
borrowing base certificates (due to the Company’s alleged failure to timely
deliver title documents for such machinery and equipment to the Agent as
required under the Credit Agreement), events of default had occurred under the
Credit Agreement (the “Specified Events of
Default”). The Agent advised the Company that as a result of
the occurrence and continuance of the Specified Events of Default, neither Agent
nor any lender has any obligation to make any further advances, issue any
letters of credit for, or otherwise extend credit to the
Borrowers. The Agent also notified the Company that, pursuant to the
Credit Agreement, it was requiring the Company to collateralize all the letter
of credit obligations that lenders had previously incurred at the Borrower’s
request, which as of November 3, 2009 were approximately $35.8 million, with
cash or cash equivalents equal to 105% of the maximum amount then available to
be drawn under such letters of credit. The Agent reserved all its
other rights, which include terminating the revolving portion of the facility,
accelerating all other financial obligations of the Company, and charging the
default rate under the Credit Agreement.
On
November 3, 2009, the Borrowers entered into a forbearance agreement (the “Forbearance
Agreement”) with the Agent and certain other credit parties and lenders
(the “Lenders”). Under
the Forbearance Agreement, the Lenders agreed to forbear, until the earlier of:
(i) November 25, 2009, (ii) any breach or default other than the Specified
Events of Default under the Credit Agreement, or (iii) the taking of any action
by the lenders under our separate real estate credit facility against the
collateral under the Credit Agreement (the “Forbearance Period”),
from exercising any of their rights or remedies under the Credit Agreement and
related agreements arising solely out of the Specified Events of
Default. Under the Forbearance Agreement, the Lenders have agreed to
make certain amounts of the cash collateral used to collateralize the Lenders’
letter of credit obligations available to the Borrowers during the Forbearance
Period. These funds will be made available to Borrowers for the
purposes and in the approximate amounts specified in a budget required to be
delivered by the Borrowers by November 9, 2009, in form and substance reasonably
satisfactory to the Lenders, or prior to the Borrowers’ delivery of this budget,
on a daily basis in the Agent’s discretion. Pursuant to the
Forbearance Agreement, the Company also appointed Ronald Stengel of Conway Del
Genio Gries & Co., LLC (“CDG”) as the Chief
Restructuring Officer of the Company.
On
November 4, 2009 we issued a press release, a copy of which is attached hereto
as Exhibit 99.1, announcing that the Company had entered into the Forbearance
Agreement with the Agent and the Lenders, and that this was due to the delivery
by the Agent of the October 30, 2009 notice of the Specified Events of
Default.
Item
2.04. Triggering
Events that Accelerate or Increase a Direct Financial Obligation or an
Obligation under an Off- Balance Sheet Arrangement.
Reference
is made to the disclosures at Items 1.01 and 8.01 hereof.
Item
5.02. Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
On
November 3, 2009, the Company appointed Ronald Stengel as its Chief
Restructuring Officer (“CRO”), reporting
directly to the Board of Directors of the Company. Mr. Stengel is 62
years old and is currently a Senior Managing Director at CDG, a position he has
held since May, 2002. Mr. Stengel oversees CDG’s Crisis Management
practice and has been providing crisis management and turnaround consulting
services to distressed companies for over 35 years. He has previously
served as interim Chief Executive Officer, interim Chief Operating Officer or
interim Chief Restructuring Officer of many companies, including but not limited
to, Adelphia Communications Corporation, Wolf Camera Corporation, American Pad
and Paper Company, Reading China & Glass, Inc., Smith Corona Corporation,
FlexTek Corporation, Towle Manufacturing, The Rytex Company, Town & Country
Corporation, Global Home Products, GEO Specialty Chemicals, and Texscan
Corporation. Mr. Stengel has a BS in Mechanical Engineering and an
MBA from the University of Pennsylvania.
On
November 3, 2009 the Company also engaged CDG pursuant to an agreement (the
“CDG Engagement
Letter”) which provides that CDG will provide certain restructuring
advisory services to the Company, including making Mr. Stengel available to
serve as the CRO of the Company. CDG has advised the Company that Mr.
Stengel’s compensation for his service as a Senior Managing Director is
unrelated to the amounts to be paid to CDG by the Company for CDG’s services,
including Mr. Stengel’s service as the CRO of the Company, although it may be
based in part upon CDG’s financial results during periods in which CDG provides
services to the Company.
CDG has a
long history of providing financial advisory services to the
Company. CDG was first engaged by the Company on October 4, 2006 and
continued to assist the Company through December 2008. Ben Jones, a
Managing Director of CDG, served as the Company’s Interim Chief Financial
Officer from January, 2007 through May, 2007. CDG was re-engaged by
the Company as its financial advisor on October 13, 2009.
Item
8.01. Other
Events.
The Agent’s conclusion that events of
default have occurred under the Credit Agreement, and requiring the Company to
collateralize the Lenders’ letter of credit obligations, may result in the
Company’s lenders and other creditors claiming it has defaulted, or the Company
actually being in default under its agreements with them. To the
extent there are any such claimed or actual defaults, the Company will seek
waivers of these defaults, and the Company believes it would be in the best
interests of all its creditors for such waivers to be granted. There
can be no assurance that any such defaults will be cured within applicable cure
periods, if any, or that any waivers or other relief will be obtained, in which
case such defaults may result in the acceleration of certain of the Company’s
financial obligations, which the Company may not be in a position to
satisfy.
Item 9.01
Financial
Statements and Exhibits.
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Exhibit
No.
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Exhibit
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99.1
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Press
Release, dated November 4,
2009
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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THE
PENN TRAFFIC COMPANY
(Registrant)
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By:
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/s/
Daniel J. Mahoney
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Name:
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Daniel
J. Mahoney
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Title:
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SVP,
General Counsel
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Date:
November 4, 2009