================================================================= ATLANTIC & PACIFIC BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2010 (ISSN XXXX-XXXX) December 13, 2010 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- ATLANTIC & PACIFIC BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Randy T. Antoni, Julie Anne G. Lopez and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of ATLANTIC & PACIFIC BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO ATLANTIC & PACIFIC BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF ATLANTIC & PACIFIC [00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING [00003] COMPANY'S BALANCE SHEET AS OF SEPTEMBER 11, 2010 [00004] ATLANTIC & PACIFIC'S CHAPTER 11 DATABASE [00005] LIST OF DEBTORS' 40 LARGEST UNSECURED CREDITORS [00006] LIST OF DEBTORS' LARGEST SECURED CREDITORS [00007] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CH. 11 CASES [00008] DEBTOR'S MOTION TO EXTEND DEADLINE TO FILE SCHEDULES KEY DATE CALENDAR ----------------- 12/12/10 Voluntary Chapter 11 Petition Date 12/27/10 Deadline to File Schedules of Assets and Liabilities 12/27/10 Deadline to File Statement of Financial Affairs 12/27/10 Deadline to File Lists of Contracts and Leases 01/11/11 Deadline to Provide Utilities with Adequate Assurance 03/12/11 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 04/11/11 Expiration of Debtors' Exclusive Plan Proposal Period 04/11/11 Deadline to Make Decisions About Lease Dispositions 06/10/11 Expiration of Debtors' Exclusive Solicitation Period 12/11/12 Deadline for Debtors' Commencement of Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO ATLANTIC & PACIFIC BANKRUPTCY NEWS ----------------------------------------------------------------- ATLANTIC & PACIFIC BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. 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Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) ATLANTIC & PACIFIC BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ATLANTIC & PACIFIC BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF ATLANTIC & PACIFIC ----------------------------------------------------------------- The Great Atlantic & Pacific Tea Company, Inc. 2 Paragon Drive Montvale, New Jersey 07645 Tel. No. (201) 573-9700 http://www.aptea.com/ Nearly 150 years ago, The Great American Tea Company opened a store on Vesey Street in New York City and began selling tea, coffee and spices at value prices. Soon stores sprung up all around the metropolitan area and salesmen took their wares to the road in horse-drawn carriages bound for New England, the mid-west and the south. In 1869, the Company was renamed the Great Atlantic & Pacific Tea Company, in honor of the first transcontinental railroad and hopes of expanding across the continent. A&P extended its operations to the West Coast and became the first national supermarket chain in the United States. Over the years, the Company pioneered many innovative concepts that set trends and satisfied customers. Today, The Great Atlantic & Pacific Tea Company, Inc., is a leading supermarket retailer, operating under a variety of well- known trade names, or "banners" across the mid-Atlantic and Northeastern United States. Headquartered in Montvale, New Jersey, A&P operates 395 supermarkets, combination food and drug stores, beer, wine, and liquor stores, and limited assortment food stores in Connecticut, Delaware, Massachusetts, Maryland, New Jersey, New York, Pennsylvania, Virginia, and the District of Columbia. "Banners" include A&P (101 stores), Food Basics (12 stores), Pathmark (128 stores), Super Fresh (57 stores), The Food Emporium (16 stores), and Waldbaum's (59 stores). A&P employs approximately 41,000 employees, including approximately 28,000 part-time employees, which comprise approximately 68% of its workforce. In addition, the Company operates 22 beer, wine, and liquor stores under its Best Cellars and A&P Liquor banners. Approximately 95% of A&P's workforce is covered by collective bargaining agreements. A&P's store locations are typically leased, although it owns a limited number of properties, including undeveloped land. As of February 27, 2010, the Company's open stores averaged approximately 42,200 square feet. A&P's retail footprint also reflects its December 2007 acquisition of Pathmark, Inc., at which time it acquired 141 Pathmark-branded stores for total consideration of approximately $1.4 billion. The Company financed the Pathmark Acquisition through a combination of cash on hand, equity, and approximately $475 million of debt financing. A&P's supermarkets typically offer a broad variety of branded and private label packaged or "shelf stable" foods, as well as fresh and frozen produce, meat, seafood, dairy, and general merchandise. Many of the Company's supermarkets include in-store bakeries, delis, floral departments, and fresh meat and seafood counters, and in-store pharmacies. A&P experience high rates of turnover as a function of both customer demand and perishability. The Company's operating cashflow critically depends on its ability to provide customers with high volumes of fresh, high quality, food, beverage, pharmaceutical, and other products without interruption. On average, each of its supermarkets will sell approximately 25,000 different stock-keeping units in a given week. And, while it obtains a majority of inventory from C&S Wholesale Grocers, Inc., it must rely on a broad network of approximately 2,600 other vendors, including suppliers of fresh dairy, meat, and seafood products, branded and private label food processors, to fully satisfy inventory and merchandising needs. In the 12 months ended September 11, 2010, A&P reported $8.4 billion in total revenues. Of this amount: (a) its Grocery segment, which includes packaged and frozen foods, dairy, general merchandise, alcohol, and pharmacy ' sales, generated revenues of $5.9 billion (66 percent of revenues); (b) the Meat segment, which includes meat, deli, seafood, and bakery sales, generated revenues of $1.6 billion (18 percent of revenues); and (c) the Produce segment, which includes fresh fruit, vegetable, and floral products sales, generated revenues of $1.0 billion (11 percent of revenues). A&P reported aggregate adjusted EBITDA of $104 million over this same period. Corporate Structure A&P's common stock is publicly traded on the New York Stock Exchange under the ticker "GAP." Tengelmann Warenhandelsgesellschaft KG controls approximately 42% of A&P's issued and outstanding common shares, and is the largest holder of A&P common stock. As of September 11, 2010, A&P had 175,000 shares of preferred stock outstanding, and 56,280,414 shares of common stock outstanding. The Company had 5,468 holders of common stock, and 2 holders of preferred stock as of April 30, 2010. A chart presenting A&P's corporate structure is available for free at http://bankrupt.com/misc/APCorpStructureChart.pdf The persons that own, control, or hold, directly or indirectly, with power to vote, 5% or more of A&P's voting securities as of May 20, 2010, are: Name of Holder % of Common Stock % of Preferred Stock -------------- ----------------- -------------------- Christian W.E. Haub 43 100 (Series A-T) Erivan Karl Haub 43 100 (Series A-T) Karl-Erivan Warder Haub 42 100 (Series A-T) Tengelmann Warenhandelsgesellschaft KG 42 100 (Series A-T) Alethia Research & Management 27 GAMCO Investors, Inc. 9 Bank of America Corporation 8 DBD Cayman, Limited 5 The Yucaipa Companies LLC 4 100 (Series A-Y) Capital Structure A&P is obligated on approximately $1.0 billion in funded debt, comprised of: (a) obligations under a certain Secured Credit Facility; (b) Second Lien Notes; (c) four series of Unsecured Notes; and (d) a $10.0 million unsecured Promissory Note. A&P also has 175,000 shares of convertible preferred stock issued and outstanding, with a $1,000 per share liquidation preference. A&P's prepetition indebtedness and preferred equity capital can be summarized as: Funded Debt/ Liquidation Preference Debt/Preferred Equity ($ millions) --------------------- ---------------------- Secured Credit Facility - ABL $38.0 Secured Credit Facility - Term 97.5 Second Lien Notes 260.0 Unsecured Notes 632.8 Promissory Note 10.0 --------- Total Funded Debt $1,038.3 Convertible Preferred Stock 175.0 A. Secured Credit Facility A&P, Bank of America, N.A., as administrative agent, and certain lender entities are parties to an Amended and Restated Credit Agreement dated as of December 27, 2007 -- the First Lien Credit Agreement. The First Lien Credit Agreement provides A&P with $620 million in total availability through: (a) a "Tranche A" revolver (providing $502 million in maximum availability, with no balance drawn as of December 11, 2010); (b) a "Tranche A-1" revolver (providing $20 million in maximum availability, with no balance drawn as of December 11, 2010); (c) a $47.5 million "Term Loan"; and (d) a $50 million "Term A-2" Loan. The Secured Credit Facility also provides for, among other things, a $400 million letter of credit sub-facility under which approximately $196.2 million in letters of credit are issued and outstanding as of December 11, 2010. Borrowing under the Tranche A revolver and the Tranche A-1 revolver was determined by a borrowing base formula calculated by reference to advance rates on, among other things, inventory, certain receivables, Coinstar collections, pharmacy scripts, and certain real estate, less reserves taken by the First Lien Agent. Coinstar collections are collections from certain automated, self- service kiosks through, which store customers may exchange loose change for cash, less a fee paid per dollar counted. Obligations arising under the Secured Credit Facility are secured by first priority liens on all of A&P's personal property, including inventory and receivables, pursuant to that certain security agreement dated as of December 3, 2007, by and between A&P and the First Lien Agent. Obligations arising under the Secured Credit Facility are also secured by certain of A&P's leaseholds and owned real property. Generally, the payment waterfall incorporated into the First Lien Credit Agreement provides that obligations arising under the Term Loan have a senior interest in certain "Principal Properties" versus other claims arising under the Term Loan. The payment waterfall further provides that proceeds from non-Principal Properties collateral is used: first, to satisfy claims arising under the Tranche A revolver and Term Loan (ratably); second, to cash collateralize issued but undrawn letters of credit issued by lenders under the Tranche A revolver; third, to satisfy the Tranche A-1 revolver; and fourth, to satisfy claims arising under the Term A-2 Loan. B. Second Lien Notes A&P, as issuer, and each of its affiliate guarantors, have issued senior secured notes (the Second Lien Notes) pursuant to that indenture dated as of August 4, 2009, by and between A&P and Wilmington Trust Company in its capacity as trustee. The Second Lien Notes bear interest at 11.375% per annum. Approximately $260.0 million in Second Lien Notes remain outstanding as of December 12, 2010. The Second Lien Notes mature on August 4, 2015. The Second Lien Notes are secured by second priority liens on substantially all of A&P's personal property, including inventory and receivables, pursuant to that certain security agreement dated as of August 4, 2009, by and between A&P and the Second Lien Indenture Trustee. The Second Lien Notes are also secured by certain of A&P's leaseholds and owned real property other than the Principal Properties. C. Intercreditor Agreement On August 4, 2009, the First Lien Agent, in its capacity as collateral agent under the Secured Credit Facility, and the Second Lien Agent, in its capacity as collateral agent under the Second Lien Security Agreement, entered into an agreement that, among other things, assigns relative priorities to claims arising under the Secured Credit Facility and the Second Lien Indenture -- the Intercreditor Agreement. Among other things, the Intercreditor Agreement provides that claims arising under the Second Lien Notes or the Second Lien Indenture are subordinate to claims arising under the Secured Credit Facility. The Intercreditor Agreement also imposes certain limitations on: (a) the rights and remedies available to the Second Lien Agent in an event of default; (b) the ability of the Second Lien Agent or holders of Second Lien Notes to challenge the validity or priority of liens arising under the Secured Credit Facility; and (c) the extent to which the Second Lien Noteholders and Second Lien Agent may (i) contest a postpetition financing provided by or consented-to by lenders (or their successors) under the Secured Credit Facility (including a refinanced facility) or the First Lien Agent (or its successors); and (ii) request adequate protection during a bankruptcy proceeding. A&P is expressly not a third party beneficiary of the Intercreditor Agreement. D. Unsecured Notes In addition to its secured debt, A&P has issued four series of unsecured notes: (a) $165.0 million in 5.125% unsecured convertible notes; (b) $12.8 million in 9.125% unsecured notes due 2011; (c) $255.0 million in 6.75% unsecured convertible notes due 2012; and (d) $200.0 million in unsecured quarterly interest notes due 2039. The Unsecured Notes are unsecured obligations of A&P. E. Promissory Note A&P issued a $10 million unsecured promissory note payable to Erivan Karl Haub. Mr. Haub is the father of Christian Wilhelm Erich Haub, the A&P chairman. Interest on the Promissory Note accrues at 6.00% per year, and the Promissory Note matures in August 2011. F. Convertible Preferred Stock In 2009, A&P issued 175,000 outstanding shares of convertible preferred stock, $1,000 per share liquidation preference, in two separate series: (a) 115,000 shares of "Series A-Y" convertible preferred stock; and (b) 60,000 shares of convertible preferred stock are issued through a "Series A-T". Mandatory quarterly dividends are payable on the Convertible Preferred Stock at either 8.00% (cash) or 9.50% (paid-in-kind). The Convertible Preferred Stock is convertible to common A&P stock under certain conditions, and holders of the Convertible Preferred Stock vote on matters requiring shareholder approval on an "as converted" basis. Affiliates of The Yucaipa Companies control A&P's Series A-Y Convertible Preferred Stock. Yucaipa is also entitled to appoint two directors to the A&P board by virtue of its control of the Series A-Y Convertible Preferred Stock. Tengelmann controls the Series A-T Convertible Preferred Stock. Tengelmann is entitled to appoint four directors to the A&P board by virtue of its control of the Series A-T Convertible Preferred Stock. Competition The grocery retailing industry is highly competitive and characterized by local, regional, and national competitors operating on slim profit margins. More recently, A&P have faced increasing competitive challenges from mass merchandisers, warehouse clubs, drug stores, dollar stores, and convenience stores, including Costco, Dollar Tree, Sam's Club, and Target. A&P's in-store pharmacy operations also face growing competition from mail-order and Internet-based prescription processors, as well as traditional brick and mortar pharmacies. This challenging operating environment has been compounded by falling producer and retail food prices, and competitors' increased willingness to engage in price-based competition. Legacy Obligations As of the December 12, 2010, A&P's cost structure reflects an unsustainable level of legacy obligations that place A&P at a competitive disadvantage to their traditional and non-traditional peers. Legacy obligations include a significant number of "dark store" leases the Company have been unable to fully assign, sublease, or terminate. A&P's estimated dark store net rental expense will be $77 million in 2011 alone. In total, reserves taken for dark store leases and similar locations reflect a total net liability, of approximately $232 million as of September 11, 2010; however, the actual economic impact will be significantly larger. A&P is also a party to a number of materially unfavorable supply and services contracts. In particular, A&P's contract with C&S, upon whom it relies for approximately 70% of total merchandise, is a significant impediment to profitability and places A&P at a competitive disadvantage to their peer group. A&P's logistics contract with Grocery Haulers Inc., under which GHI is the primary logistics provider for A&P's Pathmark-branded stores, is another significant drain on operating cashflow. In addition to its specific obligations under the GHI contract, A&P is a party to approximately 39 separate collective bargaining agreements. Those CBAs cover approximately 95% of the Company's workforce. Among other things, those agreements require A&P to make significant pension, and health care-related contributions on its employees' behalf. A&P believes these legacy obligations will continue to increase over time. Certain of A&P's multi-employer pension plans have already reached "red" or "yellow" status under existing regulatory requirements, and the Company has recorded for a liability of $97 million from previous pension fund withdrawals, as of September 11, 2010. The Company may have a potential additional withdrawal obligation of up to $50 million payable over a period of up to 25 years in the future. A&P believes its collectively-bargained wage, pension, and health care obligations place it at a competitive disadvantage and are unsustainable at existing levels. Events Leading to the Chapter 11 Cases A. Challenging Operating Environment Ongoing challenges facing the U.S. economy and the corresponding slowdown in consumer purchasing have negatively impacted A&P's revenues and operating cashflow, relates Frederic F. Brace, Chief Administrative Officer and Chief Restructuring Officer of A&P. Falling consumer spending rates have been exacerbated by declines in producer and retail food prices, resulting in retail price deflation across the grocery industry as a whole, Mr. Brace explains. This deflationary cycle has also been compounded by the intense competitive pressure found in the supermarket industry, he notes. A&P's $8.4 billion in revenues over the 12 months ended September 11, 2010, reflects an 8.9 percent decline over the period ended September 10, 2009, with A&P generating only $104 million in EBITDA over this time. According to Mr. Brace, the reduction in EBITDA has left the Company with diminished capacity to invest in long-term capital projects, with projected capital expenditures for the current fiscal year reduced over $10 million from fiscal 2009, and over $40 million from fiscal 2008. A&P's comparable store sales growth is also down approximately 6.9 percent on a year-to-date basis. Margin pressure imposed by declining operating cashflow has, in turn, amplified the bottom line effects of the Company's leveraged balance sheet and significant legacy costs, notes Mr. Brace. The Company has estimated that "dark store" leases will impose approximately $77 million of costs in fiscal 2011 alone. Unfavorable contracts with parties like C&S and GHI continue to weigh on the Company's and ongoing pension and post-retirement obligations have contributed to its declining performance, Mr. Brace states. B. Restructuring Initiatives Prior to December 12, 2010, A&P took steps to both increase liquidity and reduce costs. In August 2009, A&P raised approximately $162.2 million in preferred equity capital through its sale of Convertible Preferred Stock. Also in August 2009, the Company raised an additional $253.0 million through the sale of the Second Lien Notes. In July 2010, A&P publicly launched a comprehensive, five-point turnaround plan to increase profitability and stakeholder value. The plan is focused on: (a) installing a strong management team; (b) reducing structural and operating costs; (c) improving customer value; (d) enhancing the overall customer experience; and (e) increasing liquidity. Through this plan, A&P implemented wholesale changes to its management team in 2010, including the appointment of a new chief executive officer; the appointment three new executive officers with significant industry expertise; and my own appointment as Chief Administrative Officer in August 2010, discloses Mr. Brace. Liquidity-enhancing initiatives have included the sale of non-core or underperforming assets and liquidity-enhancing transactions like an $89.8 million sale-leaseback of six owned store locations. In addition, A&P considered the potential sale of its 16 Food Emporium locations, although the Company has chosen to retain this marquee brand for the time being. The Company has also sought to increase operating cash flow by optimizing inventory mix; increasing sales training initiatives; and introducing new higher margin, "owned label" brands and products across its store fleet. In addition, A&P initiated a major liquidity enhancing initiative in July 2010, when it retained Bank of America, the First Lien Agent, to secure a leasehold mortgage financing to upsize the First Lien Credit Facility ABL by approximately $200 million, relates Mr. Brace. Throughout the Summer and early Fall, the Company's advisors met with the ABL lenders and prospective investors, while initially targeting to close on the facility in late September. After experiencing some setbacks, including the unexpected exit of a prospective "anchor" investor, the Company's new management team met personally with and proceeded to secure support from investors. Yet, in the days after Thanksgiving, when it became clear that certain of A&P's business partners could not provide meaningful cost concessions -- an important part of the business plan underlying this facility -- the Company was forced to abandon this financing initiative. Mr. Brace explains that A&P took additional prepetition steps to address its uncompetitive cost structure. The Company conducted multiple reductions in force, cut corporate spending, and reduced general and administrative costs. Those initiatives have already generated total cost savings of approximately $40 million on an annualized basis, including over $10 million in annual salary savings, notes Mr. Brace. Since July 2010, the Company has also closed or sold 32 underperforming store locations and continues to seek opportunities to exit unprofitable and marginal store locations. A&P have also sought to work constructively with its business partners in this process, he adds. In particular, the Company made repeated efforts to engage C&S given C&S' undeniable importance to the Company's supply chain and cost structure as a whole. But C&S appeared to be unwilling to provide meaningful cost or trade concessions. In addition, the Company has sought to collaboratively engage its workforce to reduce store labor costs. In October, the credit rating service Standard & Poor's downgraded the Company's debt and said it doesn't expect "material improvements in operating performance," according to Tiffany Kary of Bloomberg News. On December 10, 2010, the Company's stock price fell more than 67%, and trading was halted in the afternoon, reports The Associated Press. Eventually, the Company determined that the combination of falling revenues, a leveraged balance sheet, legacy costs, and unfavorable supply relationships could not be fixed outside of Chapter 11. On December 12, 2010, A&P and 53 of its affiliates delivered their Chapter 11 petitions to the United States Bankruptcy Court for the Southern District of New York. Citing an unnamed source familiar with the matter, The Wall Street Journal's Mike Spector said A&P had about $13 million in interest payments due to unsecured creditors Wednesday, and wanted to preserve that money rather than pay it to those that would be lower down in the payment pecking order during bankruptcy proceedings. Unlike many companies that have recently filed for Chapter 11 due to the economic slump, A&P doesn't have a prearranged deal with creditors to restructure its debts, notes the Journal. That means the company will have to develop a reorganization plan in bankruptcy court and solicit consent from creditors, a process that can last months or longer, the report said. DIP Financing Following its Chapter 11 filing, A&P immediately took actions to make sure it had more than sufficient liquidity to fund its in- court restructuring, relates Mr. Brace. Specifically, the Debtors have secured a fully-committed, $800 million DIP facility from JPMorgan Chase Bank, he says. The DIP facility is secured by the collateral securing the prepetition Senior Credit Facility plus unencumbered property, including nonresidential real property leases. The DIP facility also contains very favorable terms to allow the Debtors to reorganize and emerge from Chapter 11, relates Mr. Brace. These terms include an 18-month maturity and no "case control" covenants, he explains. Subject to Court approval, the Debtors will have approximately $200 million in cash available on their balance sheet through a new term loan, and $450 million in additional borrowing capacity upon final DIP approval. Having secured an $800 million DIP facility and guided by an experienced management team, the Debtors aver that they will use every available tool to bring their cost structure in line with market peers and maximize stakeholder value and will leave no stone unturned. A&P Assets Mr. Brace said the Debtors have assets within the United States of more than $2.5 billion, with substantial assets in Connecticut, Delaware, Maryland, New Jersey, New York, and Pennsylvania. The Debtors do not have significant assets located outside the territorial limits of the United States, he says. Moreover, the Debtors' books and records are located at 2 Paragon Drive, Montvale, in New Jersey. Senior Management These individuals comprise the Debtors' existing senior management Name Position ---- -------- Samuel Martin President & Chief Executive Officer Frederic F. Brace Chief Administrative Officer Brenda M. Galgano Senior Vice President and Chief Financial Officer Christopher McGarry Senior Vice President, General Counsel & Secretary Estimated Expenses The Debtors' estimated amount of weekly payroll to employees, and the estimated amount to be paid to officers, stockholders, directors, and financial and business consultants, for the 30-day period following the filing of the Chapter 11 petitions, is: Payments to Employees $68.27 million Payments to Officers $318,000 Payments to Financial and Business Consultants $3.05 million The Debtors said they will provide supplemental information regarding the amount proposed to be paid to directors to the U.S. Trustee and to any other party upon reasonable request to the Debtors' counsel. For the 30-day period following the Petition Date, the Debtors' estimated cash receipts and disbursements, net cash gain or loss, and obligations and receivables expected to accrue that remain unpaid, other than professional fees, are: Cash Receipts $617.1 million Cash Disbursements $662.9 million Net Cash Loss $45.8 million Unpaid Obligations $131 million Unpaid Receivables $147 million ----------------------------------------------------------------- [00002] COMPANY'S PRESS RELEASE CONCERNING CHAPTER 11 FILING ----------------------------------------------------------------- A&P Files for Chapter 11 Reorganization to Facilitate Financial and Operational Restructuring JPMorgan Chase to Provide $800 Million in DIP Financing Stores Are Fully Stocked and Remain Open, Providing Uninterrupted Service to Customers MONTVALE, New Jersey -- December 12, 2010 -- The Great Atlantic & Pacific Tea Company, Inc. (A&P) (NYSE: GAP) announced today that it has filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York. The Chapter 11 process will facilitate A&P's financial and operational restructuring, which is designed to restore the Company to long-term financial health. A&P continues to conduct its business and serve customers at its 395 stores. The Company's stores are fully stocked with their complete range of high quality products, and all existing customer promotional and customer loyalty programs will stay in place. The Company will have access to $800 million in debtor in possession (DIP) financing, which will enable it to continue paying local suppliers, vendors, employees and others in the normal course of business. A&P President and Chief Executive Officer Sam Martin said, "We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring. While we have made substantial progress on the operational and merchandising aspects of our turnaround plan, we concluded that we could not complete our turnaround without availing ourselves of Chapter 11. It will allow us to restructure our debt, reduce our structural costs, and address our legacy issues. Mr. Martin continued, "With the protections afforded by the Bankruptcy Code and the backing of a new, pre-eminent lender, we can make strategic decisions that will benefit the Company over the long term, enabling A&P to emerge with a new capital structure and in a much improved position to exploit its fundamental strengths. Importantly, during this reorganization our stores will operate normally with fully stocked shelves and the excellent service A&P customers expect. Our customers can shop our stores with confidence, and our employees can continue delivering great value and service to our customers every day." As the Company implements its financial and operational restructuring, it intends to continue and accelerate most of the basic elements of the turnaround plan announced in October, including: * A completely new management team is in place; * Reducing structural and operating costs; * Improving the A&P value proposition for customers; and * Enhancing the customer experience in stores. A&P's major shareholders support the action announced today and believe that the Company's plan will advance and accelerate the comprehensive turnaround effort already underway. The Company also announced that Frederic F. ("Jake") Brace, who was named Chief Administrative Officer in August, will lead the Company's restructuring effort. Mr. Brace will take the additional title of Chief Restructuring Officer to reflect his expanded role. JPMorgan Chase to Provide $800 Million in DIP Financing The Company has entered into an $800 million DIP facility with JPMorgan Chase & Co. The Company's ability to obtain borrowings under such facility is subject to satisfaction of customary conditions and receipt of court approval. The DIP facility is being fully underwritten by JPMorgan Chase. A hearing to approve a portion of the facility has been scheduled for December 13. Upon approval, this DIP facility will be available to fund A&P's operations, pay its vendors and for other corporate purposes. In addition, this financing will provide the capital necessary to continue the Company's efforts to improve and renovate select stores and provide enhanced product offerings to its customers. Employees to Continue to Receive Wages and Benefits The Company expects to receive full authority to pay employee wages and benefits on an uninterrupted basis. Background on Chapter 11 Chapter 11 of the U.S. Bankruptcy Code allows a company to continue operating its business and managing its assets in the ordinary course of business. The U.S. Congress enacted Chapter 11 to encourage and enable a debtor business to continue to operate as a going concern, to preserve jobs and to maximize the recovery of all its stakeholders. The Company's legal representative in its Chapter 11 cases is Kirkland & Ellis LLP and its financial advisor is Lazard. About A&P Founded in 1859, A&P is one of the nation's first supermarket chains. The Company operates 395 stores in eight states and the District of Columbia under the following names: A&P, Waldbaum's, Pathmark, Best Cellars, The Food Emporium, Super Fresh and Food Basics. ----------------------------------------------------------------- [00003] COMPANY'S BALANCE SHEET AS OF SEPTEMBER 11, 2010 ----------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $94,343,000 Restricted cash 1,691,000 Accounts receivable, net of allowance for doubtful accounts of $6,102 at 9/11/2010 150,523,000 Inventories, net 472,939,000 Prepaid expenses and other current assets 43,224,000 Assets held for sale 16,466,000 -------------- Total current assets 779,186,000 Non-Current Assets Property: Property owned, net 1,286,576,000 Property leased under capital leases, net 78,032,000 -------------- Property, net 1,364,608,000 Goodwill 110,412,000 Intangible assets, net 141,938,000 Other assets 134,888,000 -------------- Total assets $2,531,032,000 ============== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $169,706,000 Current portion of obligations under capital leases 13,624,000 Current portion of real estate liabilities 4,293,000 Accounts payable 241,122,000 Book overdrafts 38,661,000 Accrued salaries, wages and benefits 144,700,000 Accrued taxes 41,293,000 Other accruals 267,302,000 -------------- Total current liabilities 920,701,000 Non-current liabilities: Long-term debt 832,145,000 Long-term obligations under capital leases 127,635,000 Long-term real estate liabilities 328,868,000 Deferred real estate income 84,487,000 Other financial liabilities 3,493,000 Other non-current liabilities 913,636,000 -------------- Total liabilities 3,210,965,000 Series A redeemable preferred stock ? no par value, $1,000 redemption value; authorized - 700,000 shares; issued ? 175,000 shares 136,280 Stockholders' deficit: Common stock ? $1 par value; authorized ? 260,000,000 shares; issued and outstanding ? 56,280,414 at 9/11/2010 56,280,000 Additional paid-in capital 514,936,000 Accumulated other comprehensive loss (79,023,000) Accumulated deficit (1,308,406,000) -------------- Total stockholders' deficit (816,213,000) -------------- Total liabilities and stockholders' deficit $2,531,032,000 ============== ----------------------------------------------------------------- [00004] ATLANTIC & PACIFIC'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: The Great Atlantic & Pacific Tea Company, Inc. 2 Paragon Road Montvale, NJ 07645 Bankruptcy Case No.: 10-24549 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- 2008 Broadway, Inc. 10- AAL Realty Corporation 10- Adbrett Corporation 10- Amsterdam Trucking Corporation 10- APW Supermarket Corporation 10- APW Supermarkets, Inc. 10- Bergen Street Pathmark, Inc. 10- Best Cellars DC, Inc. 10- Best Cellars Inc. 10- Best Cellars Licensing Corp. 10- Best Cellars Massachusetts, Inc. 10- Best Cellars VA, Inc. 10- Bev, Ltd. 10- Borman's, Inc. 10- Bridge Stuart, Inc. 10- Clay-Park Realty Corp. 10- Compass Foods, Inc. 10- East Brunswick Stuart, LLC 10- Farmer Jack's of Ohio, Inc. 10- Food Basics, Inc. 10- Gramatan Foodtown Corp. 10- Grape Finds at DuPont, Inc. 10- Grape Finds Licensing Corp. 10- Greenlawn Land Development Corp. 10- Hopelawn Property I, Inc. 10- Kohl's Food Stores, Inc. 10- Kwik Save Inc. 10- Lancaster Pike Stuart, LLC 10- LBRO Realty, Inc. 10- Lo-Lo Discount Stores, Inc. 10- Mac Dade Boulevard Stuart, LLC 10- McLean Avenue Plaza Corp. 10- Milik Service Company, LLC 10- Montvale Holdings, Inc. 10- North Jersey Properties, Inc. VI 10- Onpoint, Inc. 10- Pathmark Stores, Inc. 10- Plainbridge, LLC 10- SEG Stores, Inc. 10- Shopwell, Inc. 10- Shopwell, Inc. 10- Spring Lane Produce Corp. 10- Super Fresh Food Markets, Inc. 10- Super Fresh/Sav-A-Center, Inc. 10- Super Market Service Corp. 10- Super Plus Food Warehouse, Inc. 10- Supermarkets Oil Company, Inc. 10- The Food Emporium, Inc. 10- The Old Wine Emporium of 10- Westport, Inc. The South Dakota Great Atlantic & 10- Pacific Tea Company, Inc. Tradewell Foods of Conn., Inc. 10- Upper Darby Stuart, LLC 10- Waldbaum, Inc. 10- Chapter 11 Petition Date: December 12, 2010 Bankruptcy Court: U.S. Bankruptcy Court Southern District of New York (White Plains) Bankruptcy Judge: The Honorable Robert D. Drain Debtors' Counsel: Paul M. Basta, Esq. James H.M. Sprayregen, Esq. Ray C. Schrock, Esq. Kirkland & Ellis, LLP 601 Lexington Avenue New York, NY 10022 Tel.: (212) 446-4800 Fax : (212) 446-4900 Email: pbasta@kirkland.com james.sprayregen@kirkland.com ray.schrock@kirkland.com James J. Mazza, Jr., Esq. Kirkland & Ellis LLP 300 N LaSalle Chicago, IL 60654 Tel: (312) 862-2000 Fax: (312) 862-2200 Email: james.mazza@kirkland.com Debtors' Claims Agent: Kurtzman Carson Consultants LLC 2335 Alaska Ave El Segundo, CA 90245 Tel: (310) 823-9000 Debtors' Financial Advisor: Lazard Freres & Co. LLC Debtors' Management Consultants: Huron Consulting Group The petition was signed by Frederic F. Brace, A&P chief administrative officer and chief restructuring officer. ----------------------------------------------------------------- [00005] LIST OF DEBTORS' 40 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity/Person Nature of Claim Claim Amount ------------- --------------- ------------ Wilmington Trust Company Bond Debt $229,000,000 Rodney Square North 1100 Market St Wilmington, DE 19890 Wilmington Trust Company Bond Debt $200,000,000 Rodney Square North 1100 Market St Wilmington, DE 19890 Wilmington Trust Company Bond Debt $165,000,000 Rodney Square North 1100 Market St Wilmington, DE 19890 McKesson Drug Co Trade Debt $15,119,582 Wilmington Trust Company Bond Debt $12,840,000 Haddon House Food Products Trade Debt $10,611,632 Coca-Cola Enterprises Trade Debt $7,099,716 Frito-Lay Inc Trade Debt $4,528,126 Nabisco Biscuit Company Trade Debt $3,982,278 Pepsi-Cola-Hasbrouck Heights Trade Debt $3,172,078 Nestle DSD Company Ice Cream Trade Debt $2,158,873 Entenmann's Bakery Trade Debt $2,154,250 Pepsi-Cola Bottling Company Trade Debt $1,728,999 of New York, Inc. Pepperidge Farm Inc Bread Trade Debt $1,696,820 Keebler Biscuit Co Trade Debt $1,617,637 Dora's Naturals Inc. Trade Debt $1,513,969 18718 Borman Avenue Lease Rent $1,456,000 Ashley Livonia A&P, LLC Lease Rent $1,391,936 Arnold Bakers Inc Trade Debt $1,388,848 S B Thomas Inc Trade Debt $1,304,352 Amalgamated Meat Cutters Union Debt $1,262,649 Stroehmann Bakeries Inc Trade Debt $1,238,504 Meadowbrook - Suffolk Trade Debt $1,158,432 Interstate Brands Trade Debt $1,118,325 Advantage IQ Inc Utility Debt $1,109,220 Riveroak-Cofinance-Carteret, Lease Rent $1,085,841 LLC Garelick Farms Inc Trade Debt $1,055,286 Wise Foods Trade Debt $912,221 Grocery Haulers Inc Trade Debt $893,848 Farmland Dairies Trade Debt $877,892 Canada Dry Bottling of NY Trade Debt $860,523 OTR Associates Lease Rent $847,193 Lehigh Valley Dairies Trade Debt $806,484 G/W Jefferson-St. Jean LLC Lease Rent $789,212 Bunzl Distribution Trade Debt $774,073 Snapple Distributors Inc Trade Debt $736,266 ISE America Trade Debt $719,575 FJ Livonia Portfolio, L.P. Lease Rent $673,049 Lami Products Trade Debt $673,048 Martin's Famous Pastry Trade Debt $670,705 ----------------------------------------------------------------- [00006] LIST OF DEBTORS' LARGEST SECURED CREDITORS ----------------------------------------------------------------- Creditors Type of Collateral Claim Amount --------- ------------------ ------------ Bank of America, N.A. as Accounts receivable, $133,800,000 Administrative Agent chattel paper, claims, for Senior Secured Credit judgments, settlements, Facility deposit accounts, c/o Christine Hutchinson documents, equipment, Bank of America, N.A. fixtures, general 100 Federal Street intangibles, goods, Boston, Massachusetts 02110 instruments, inventory, Fax: 617-790-1234 investment property, letter of credit rights, software, supporting obligations, cash, insurance proceeds, certain real property, certain leasehold interests, pledged stock and the proceeds thereof. Wilmington Trust Company as Accounts receivable, $260,000,000 Indenture Trustee for chattel paper, claims, Holders of Second Lien Notes judgments, settlements, c/o Corporate Trust deposit accounts, Administration documents, equipment, Rodney Square North fixtures, general 1100 Market Street intangibles, goods, Wilmington, DE 19890 instruments, inventory, Fax: 302-636-4145 investment property, letter of credit rights, software, supporting obligations, cash, insurance proceeds, certain real property, certain leasehold interests, pledged stock and the proceeds thereof. ----------------------------------------------------------------- [00007] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CH. 11 CASES ----------------------------------------------------------------- The Great Atlantic & Pacific Tea Company Inc. and its affiliated debtors ask the U.S. Bankruptcy Court for the Southern District of New York to jointly administer their Chapter 11 cases under Case No. 10-24549. Joint administration of these Chapter 11 cases will reduce fees and costs by avoiding duplicative filings, objections, and hearings, according to the Debtors' attorney, Paul Basta, Esq., at Kirkland & Ellis LLP, in New York. "Joint administration will also allow the United States Trustee and all parties in interest to monitor these Chapter 11 cases with greater ease and efficiency," Mr. Basta says in court papers. Mr. Basta says joint administration will not adversely affect the Debtors' constituencies because it is only administrative, not substantive, consolidation of the Debtors' estates. The Debtors propose that the case caption be modified to reflect the joint administration of their cases as: UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ----------------------------------- ) In re: ) Chapter 11 ) THE GREAT ATLANTIC & PACIFIC TEA ) Case No. 10-____(___) COMPANY, INC., et al. ) ) Debtors ) Jointly Administered ) ----------------------------------- The Debtors also seek authority to file their monthly operating reports on a consolidated basis but intend to track and break out disbursements on a debtor-by-debtor basis. ----------------------------------------------------------------- [00008] DEBTOR'S MOTION TO EXTEND DEADLINE TO FILE SCHEDULES ----------------------------------------------------------------- The Great Atlantic & Pacific Tea Company Inc. and its affiliated debtors ask the Court to give them 15 more days to file their schedules of assets and liabilities and statement of financial affairs. Section 521 of the Bankruptcy Code and Rule 1007 of the Federal Rules of Bankruptcy Procedure require a debtor to file its (i) schedules of assets and liabilities; (ii) schedules of current income and expenditures; (iii) schedules of executory contracts and unexpired leases; and (iv) statements of financial affairs within 15 days after its bankruptcy filing. Paul Basta, Esq., at Kirkland & Ellis LLP, in New York, says the proposed extension is reasonable given the scope of the Debtors' businesses, the limited staff available to perform the required internal review of their financial records and affairs, and the numerous critical operational matters that their accounting and legal personnel must address in the early days of their Chapter 11 cases. "Focusing the attention of their key accounting and legal personnel on critical operational and chapter 11 compliance issues during the early days of these Chapter 11 cases will help the Debtors make a smoother transition into Chapter 11 and, therefore, ultimately will maximize the value of their estates," Mr. Basta says. *** End of Issue No. 1 ***