================================================================= ATLANTIC & PACIFIC BANKRUPTCY NEWS Issue Number 3 ----------------------------------------------------------------- Copyright 2010 (ISSN XXXX-XXXX) December 15, 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 Jehlyn Grace Q. Molijon, Randy T. Antoni, Julie Anne G. Lopez, Psyche A. Castillon 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 ------------- [00026] DEBTORS' MOTION TO ESTABLISH PROTOCOL TO PROTECT NOLS [00027] DEBTORS' MOTION TO PAY PREPETITION SALES AND USE TAXES [00028] DEBTORS' MOTION FOR INJUNCTION AGAINST UTILITY COMPANIES [00029] DEBTORS' MOTION TO ESTABLISH CASE MANAGEMENT PROCEDURES [00030] DEBTORS' 1ST OMNIBUS MOTION TO REJECT UNEXPIRED LEASES [00031] DEBTORS' MOTION TO PAY PREPETITION CRITICAL VENDOR CLAIMS [00032] DEBTORS' MOTION TO HONOR PREPETITION EMPLOYEE OBLIGATIONS [00033] DEBTORS' APPLICATION TO EMPLOY KCC AS CLAIMS AGENT [00034] SAFEWAY, FOOD LION, STOP & SHOP MAY BID FOR A&P STORES [00035] CITIGROUP LOWERS RATING ON A&P TO 'SELL', SAYS WSJ 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 ----------------------------------------------------------------- [00026] DEBTORS' MOTION TO ESTABLISH PROTOCOL TO PROTECT NOLS ----------------------------------------------------------------- The Great Atlantic & Pacific Tea Company, Inc. and its debtor- affiliates ask the U.S. Bankruptcy Court for the Southern District of New York to enter an order establishing notification and hearing procedures for (i) transfers of equity securities that must be complied with before transfers of the stock are deemed effective, and (ii) asserting a claim of worthless stock deduction with respect to the Equity Securities that must be complied with before the claims of worthless stock deductions are deemed effective. The Procedures for Trading in Equity Securities and Procedures for Claiming a Worthless Stock Deduction are necessary to protect and preserve the Debtors' valuable tax attributes, including net operating loss carryforwards (NOLs), which are estimated to total approximately $858 million as well as certain tax and business credits of approximately $121 million, relates Paul Basta, Esq., at Kirkland & Ellis LLP, in New York. Mr. Basta says the NOLs are of significant value to the Debtors and their estates because the Debtors can carry their NOLs forward to offset their future taxable income for up to 20 taxable years, thereby reducing their future aggregate tax obligations. "Such NOLs also may be utilized by the Debtors to offset any taxable income generated by transactions completed during these Chapter 11 cases," he explains. Also of significant value, the Tax Credits may be used as a dollar for dollar offset against taxes owed, Mr. Basta continues. While the value of these Tax Attributes is contingent on whether the Debtors will have sufficient taxable income to use the Tax Attributes before they expire, they could translate into potential future tax savings for the Debtors of approximately $464 million, based on a combined federal and state income tax rate of 40%, Mr. Basta says. Procedures for Trading in Equity Securities a. Substantial Shareholders must file with the Court, and serve on proposed counsel to the Debtors, a declaration of his/her status, on or before the later of (i) 30 days after entry of the Interim Order of the NOL Motion and (ii) 10 days after becoming a Substantial Shareholder. A "Substantial Shareholder" is any person or entity that (x) has Beneficial Ownership of at least 7,875 shares of the Debtors' Preferred Stock (representing approximately 4.5% of all issued and outstanding shares of Preferred Stock) or (y) 4,100,000 shares of Common Stock (representing approximately 4.5% of all issued and outstanding shares of Common Stock on a fully converted basis). b. Substantial Shareholders or potential Substantial Shareholders must file with the Court, and serve on counsel to the Debtors and upon counsel to the administrative agent for the Debtors' proposed postpetition secured lender, Davis Polk & Wardwell LLP, an advance written declaration of an intended transfer of Beneficial Ownership of Equity Securities that would result in either: (i) an increase in the amount of Equity Securities of which a Substantial Shareholder has Beneficial Ownership or would result in a person or entity becoming a Substantial Shareholder, or (ii) in a person or entity ceasing to be a Substantial Shareholder. "Beneficial Ownership" of Equity Securities is determined under Section 382 of the Internal Revenue Code and related regulations, and includes direct and indirect ownership; ownership by the holder's family members and entities acting in concert with the holder to make a coordinated acquisition of equity securities and ownership of equity securities that the holder has an Option to acquire; and for purposes of determining Beneficial Ownership of Common Stock, each share of Preferred Stock is treated as 200 shares of Common Stock. An "Option" to acquire equity securities includes any contingent purchase, warrant, convertible debt, put, call, stock subject to risk of forfeiture, contract to acquire stock or similar interest, regardless of whether it is contingent or otherwise not currently exercisable. c. The Debtors have 20 calendar days after receipt of a Declaration of Proposed Transfer to object on the grounds that the transfer might adversely affect their ability to utilize their Tax Attributes. If they object, the transaction would not be effective unless the objection is withdrawn or the transaction is approved by a final order of the Court that is no longer subject to an appeal. If the Debtors do not object, the transaction could proceed solely as set forth in the Declaration of Proposed Transfer. Procedures for Claiming Worthless Stock Deductions a. Any person or entity that currently is or becomes a 50% Shareholder must file with the Court, and serve upon counsel to the Debtors and Davis Polk a notice of his/her status on or before the later of (i) 30 days after the date of entry of the Interim Order of the NOL Motion, and (ii) 10 days after becoming a 50% Shareholder. A "50% Shareholder" is any person or entity that, within that person's or entity's last three taxable years, (x) has Beneficial Ownership of at least 87,500 shares of the Debtors' Preferred Stock (representing approximately 50% of all issued and outstanding shares of Preferred Stock) or (y) 45,640,207 shares of the Common Stock (representing approximately 50% of all issued and outstanding shares of Common Stock on a fully converted basis). b. Prior to filing any federal or state tax return, or any amendment to a return, claiming any deduction for worthlessness of the Equity Securities, for a tax year ending before the Debtors' emergence from Chapter 11 protection, the 50% Shareholder must file with the Court, and serve upon counsel to the Debtors, an advance written declaration, of the intended claim of worthlessness. c. The Debtors will have 20 calendar days after receipt of a Declaration of Intent to object on the grounds that such claim might adversely affect the Debtors' ability to utilize their Tax Attributes. If the Debtors object, the filing of the return with the claim would not be permitted unless approved by a final order of the Court that is no longer subject to appeal. If the Debtors do not object, the filing of the return with the claim would be permitted as set forth in the Declaration of Intent to Claim a Worthless Security Deduction. Notice of Procedures To ensure parties-in-interest receive appropriate notice of the Procedures for Trading in Equity Securities and Procedures for Claiming a Worthless Stock Deduction, the Debtors request that the Court approve their notice provisions, which include: -- No later than five business days following entry of the Interim Order on the NOL Motion, the Debtors will serve by overnight mail, a notice to: (a) holders of more than one million shares of Common Stock; (b) all holders of Preferred Stock; (c) the entities listed on the Consolidated List of Creditors Holding the 40 Largest Unsecured Claims; (d) transfer agents for any Equity Security; (e) the Securities and Exchange Commission; (f) the Internal Revenue Service; (g) counsel to the administrative agent for the Debtors' proposed postpetition secured lender, Davis Polk & Wardwell LLP; and (h) those parties who have requested service of papers. -- Within five business days following entry of the Order granting the NOL Motion, the Debtors will (i) publish the Notice of Order in The Wall Street Journal (National Edition), and (ii) submit the Notice of Order to Bloomberg Professional Service for potential publication by Bloomberg. ----------------------------------------------------------------- [00027] DEBTORS' MOTION TO PAY PREPETITION SALES AND USE TAXES ----------------------------------------------------------------- The Debtors seek approval from the U.S. Bankruptcy Court for the Southern District of New York to pay their prepetition taxes, business license and other fees. In the ordinary course of operating their business, the Debtors pay sales and use taxes, franchise taxes, income taxes and real and personal property taxes. They are also required to pay business licenses, permits and annual reporting fees. The Debtors estimate that about $11.1 million will become due and payable on account of their sales and use taxes, and about $61,000 on account of license fees within 21 days after following their bankruptcy filing. Meanwhile, the Debtors estimate that no franchise, state income and personal property taxes will become due and payable within 21 days after December 12, 2010. But they have accrued about $25,000 in franchise taxes and $125,000 in state income taxes that are not yet due and payable as of that date. With respect to their other business taxes, including commercial rent and mercantile tax, the Debtors estimate that they have incurred about $2.3 million that are not yet due and payable. Meanwhile, about $234,000 on account of those taxes will be due and payable within 21 days after December 12, 2010. Paul Basta, Esq., at Kirkland & Ellis LLP, in New York, says the proposed payment of taxes and fees will eliminate unnecessary distractions from the Debtors' reorganization efforts. "Any litigation related to the failure to pay taxes and fees would prove distracting for the Debtors," Mr. Basta says in court papers. "It is in the best interest of the Debtors' estates to eliminate the possibility of these distractions and to enable the Debtors to continue operating without interruption and focusing on their restructuring plan," he says. ----------------------------------------------------------------- [00028] DEBTORS' MOTION FOR INJUNCTION AGAINST UTILITY COMPANIES ----------------------------------------------------------------- In the ordinary course of their businesses, the Debtors incur utility expenses for electricity, natural gas, water, sewage, telecommunications and other similar utility services. Approximately 350 utility providers provide these services through approximately 1500 accounts. A list of the Utility Providers rendering services to the Debtors as of the Petition Date may be accessed for free at: http://bankrupt.com/misc/AP_Utility_List.pdf On average, the Debtors spend approximately $14.9 million each month on utility costs. As of the Petition Date, the Debtors estimate that approximately $15.8 million in utility costs may be outstanding. Paul M. Basta, Esq., at Kirkland & Ellis LLP, in New York, tells the Court that preserving utility services on an uninterrupted basis is essential to the Debtors' ongoing operations and, therefore, to the success of their reorganization. Any disruption would adversely impact customer relationships resulting in a decline in the Debtors' revenues and profits, he adds. According to Mr. Basta, the Debtors intend to pay postpetition obligations owed to the Utility Providers in a timely manner. Furthermore, the Debtors propose to deposit $7.45 million into a newly created, segregated, interest-bearing bank account. This amount represents a sum equal to the cost of two weeks worth of the estimated aggregate monthly amount of utility services provided by all of the Utility Providers set forth on the Utility Service List, based on the Debtors' average usage for the fiscal year ending 2010. The Debtors submit that the Adequate Assurance Deposit, in conjunction with their cash flow from operations, cash on hand and proceeds from the Proposed DIP Facility, demonstrate their ability to pay for future utility services in the ordinary course of business and constitute sufficient adequate assurance to the Utility Providers. However, if any Utility Provider believes additional adequate assurance is required, the Debtors propose these procedures: a. The Debtors will provide copies of the proposed Adequate Assurance Procedures to each Utility Provider. b. The Debtors will deposit the Adequate Assurance Deposit in the Adequate Assurance Account within five business days of entry of the order granting their Utility Motion. To the extent any Utility Provider receives any value from the Debtors as adequate assurance of payment, the Debtors may reduce the Adequate Assurance Deposit maintained in the Adequate Assurance Account by that amount. c. The portion of the Adequate Assurance Deposit attributable to each Utility Provider will be returned to the Debtors on the earlier of (i) the Debtors' termination of services from the Utility Provider, and (ii) the conclusion of the Chapter 11 cases, if not applied earlier. d. Any Utility Provider desiring additional assurances of payment in the form of deposits, prepayments or otherwise must serve a request for additional assurance so that it is received by the Debtors at these addresses: (1) The Great Atlantic & Pacific Tea Company, Inc. Two Paragon Drive Montvale, New Jersey 07645 Attn.: Paul Davidovicz (ii) Kirkland & Ellis LLP 601 Lexington Avenue New York, New York 10022-4611 Attn.: Paul M. Basta Attn.: Ray C. Schrock Attn.: Nikki R. Thomas (iii) Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Attn.: Donald S. Bernstein (iv) Office of the United States Trustee for the Southern District of New York 33 Whitehall Street, 21st Floor New York, New York 10004 The Additional Assurance Request must be sent to all of the Notice Parties to be deemed valid. e. Any Additional Assurance Request must (i) be made in writing, (ii) set forth the location for which utility services are provided, (iii) include a summary of the Debtors' payment history relevant to the affected account, including any security deposits and (iv) set forth why the Utility Provider believes the Proposed Adequate Assurance is not sufficient adequate assurance of future payment. f. Any Additional Assurance Request must be made and actually received by all the Notice Parties by no later than 20 days after entry of the Utility Order by the Court. Untimely Requests will be: (i) deemed to have received adequate assurance of payment "satisfactory" to that Utility Provider in compliance with Section 366 of the Bankruptcy Code; and (ii) forbidden to discontinue, alter, or refuse service to, or discriminate against, the Debtors on account of any unpaid prepetition charges, or require additional assurance of payment other than the Proposed Adequate Assurance. g. Upon the Debtors' receipt of any Additional Assurance Request, the Debtors have the greater of (a) 20 days from the receipt of the Request and (b) 30 days from entry of an order granting the Utility Motion to negotiate with that Utility Provider to resolve the Utility Provider's Additional Assurance Request. h. The Debtors may, in their sole discretion, resolve any Additional Assurance Request by mutual agreement with the Utility Provider and without further order of the Court, and may, in connection with any agreement, in their sole discretion, provide a Utility Provider with additional adequate assurance of future payment, including but not limited to cash deposits, prepayments or other forms of security, without further order of the Court if the Debtors believe the additional assurance is reasonable. i. If the Debtors determine that the Additional Assurance Request is not reasonable and are not able to reach an alternative resolution with the Utility Provider during the Resolution Period, the Debtors, during or immediately after the Resolution Period, will request a hearing before the Court to determine the adequacy of assurances of payment with respect to a particular Utility Provider pursuant to Section 366(c)(3) of the Bankruptcy Code. j. Pending resolution of the dispute at the Determination Hearing, the relevant Utility Provider will be restrained from discontinuing, altering or refusing service to the Debtors on account of unpaid charges for prepetition services or on account of any objections to the Proposed Adequate Assurance. Against this backdrop, the Debtors ask the Court to: (a) determine that the Utility Providers have been provided with adequate assurance of payment within the meaning of Section 366 of the Bankruptcy Code by virtue of the Proposed Adequate Assurance being provided; (b) approve certain Adequate Assurance Procedures; (c) prohibit the Utility Providers from altering, refusing or discontinuing services on account of prepetition amounts outstanding and on account of any perceived inadequacy of the Proposed Adequate Assurance; and (d) determine that the Debtors are not required to provide any additional adequate assurance beyond what is proposed. To the extent the Debtors subsequently identify additional Utility Providers, the Debtors seek authority, in their sole discretion, to amend the Utility Service List to add or remove any Utility Provider. ----------------------------------------------------------------- [00029] DEBTORS' MOTION TO ESTABLISH CASE MANAGEMENT PROCEDURES ----------------------------------------------------------------- The Debtors ask the Court to enter an order providing for certain notice, case management and administrative procedures in their Chapter 11 cases. Given the number of parties-in-interest in the Chapter 11 cases, requiring that service be made upon each of these parties would waste the Debtors' limited resources, asserts Paul M. Basta, Esq., at Kirkland & Ellis LLP, in New York. The Debtors believe that requiring paper service of certain pleadings only upon the main parties-in-interest, as well as authorizing service on all parties by e-mail, will be efficient and save the estates significant time and expense. Additionally, due to the likely volume of motions and other pleadings that will be filed in the Chapter 11 cases, the Debtors have proposed that special hearing procedures be created, including the creation of regularly scheduled omnibus hearings at which the Court, the Debtors and other parties-in-interest can address several motions at once, thereby avoiding the substantial time and expense of scheduling separate hearings on each discrete matter. ----------------------------------------------------------------- [00030] DEBTORS' 1ST OMNIBUS MOTION TO REJECT UNEXPIRED LEASES ----------------------------------------------------------------- As of the Petition Date, the Debtors were tenants under hundreds of non-residential real property leases across 23 states and the District of Columbia. Generally, the Debtors do not own the property on which they conduct their operations, but rather lease the non-residential real property for the operation of their supermarkets, liquor stores, combination food and drug stores, and limited assortment food stores. Before the Petition Date, the Debtors began the process of reviewing and analyzing all of their contractual obligations so as to identify the contracts and leases that are burdensome to their estates and may be rejected pursuant to Section 365 of the Bankruptcy Code. As of December 12, 2010, the Debtors have identified 73 "dark store" leases, where they have ceased ongoing operations and have been unable to sublease, assign, or terminate the relevant leases. A schedule of the leases may be accessed for free at: http://bankrupt.com/misc/AP_Rejection_Schedule1.pdf "These leases represent an unnecessary expense to the estates, contribute no value to the Debtors' balance sheet, and will cost the Debtors tens of millions of dollars of accrued actual costs in fiscal year 2011 alone with the full economic impact on the estate potentially even more dramatic," asserts Paul M. Basta, Esq., at Kirkland & Ellis LLP, in New York. Moreover, in most instances, the Debtors have physically vacated the properties, and surrendered the keys to those counterparties through unilateral key surrender or after eviction proceedings, entry of consent judgments, or entry into mutual surrender agreements, thereby affording the appropriate Counterparties the ability to re-let the premises, Mr. Basta explains. To provide the Counterparties with sufficient notice of the Debtors' intent to reject the Dark Store Leases and to facilitate the rejection of any agreements, the Debtors have devised these Rejection Procedures: a. Within three business days of the entry of the Order, the Debtors will serve a notice to each Counterparty, setting forth: (i) the street address of the real property underlying the lease; (ii) the Debtors' monthly payment obligation, if any, under the lease; (iii) the remaining term of the lease; (iv) the name and address of the landlord; (v) a general description of the terms of the lease; and (vi) a disclosure describing the procedures for filing objections. b. Objections to the proposed rejection by the Debtors of a lease must be written and filed and served no later than 15 calendar days after the date the Debtors serve the Notice. c. If a timely objection is filed that cannot be resolved, the Court will schedule a hearing to consider the objection only with respect to the rejection of any lease as to which an objection is properly filed and served. If the Court upholds the objection, and the subject of the objection is the proper effective date of rejection, and the Court determines the effective date of rejection of the lease, that date will be the rejection date. If the objection is overruled or withdrawn or the Court does not determine the date of rejection, the rejection date of the lease will be deemed to have occurred on the Rejection Date. d. Absent an objection being filed, the Debtors' proposed rejection of the lease will become effective as of December 12, 2010, without further notice, hearing or order of the Court. e. If the Debtors have deposited amounts with a lessor as a security deposit or other arrangement, the lessor may not set off or otherwise use the deposit without the prior authority of the Court. "Leases such as the Dark Store Leases, where the Debtors are not operating stores or planning to do so in the near term, are the epitome of burdensome nonresidential real property leases," Mr. Basta contends. Accordingly, the Debtors seek the Court's authority to reject the Dark Store Leases pursuant to their proposed Rejection Procedures. ----------------------------------------------------------------- [00031] DEBTORS' MOTION TO PAY PREPETITION CRITICAL VENDOR CLAIMS ----------------------------------------------------------------- See prior entry at [00018]. Judge Robert D. Drain issued an order granting the Debtors' request on an interim basis. The Interim Order provides that the Debtors are authorized, but not directed, to pay Critical Vendor Claims, which include claims under Section 503(b)(9) of the Bankruptcy Code, provided that payments will not exceed $62 million (the Critical Vendor Cap) in the aggregate. The Debtors' payment of Critical Vendor Claims will not exceed the Critical Vendor Cap unless otherwise ordered by the Court after notice and a hearing. The Payment Procedures and the form of Trade Agreement are approved in their entirety, the Court said. The Debtors are further authorized, but not directed, to pay up to $5 million in Section 503(b)(9) Claims. Payments made on account of the Section 503(b)(9) Clams will not count against the Critical Vendor Cap. Judge Drain held that the Debtors will condition payment of Critical Vendor Claims and Section 503(b)(9) Claims upon the execution of a Trade Agreement except as otherwise provided by the Payment Procedures, and the Debtors are authorized to enter into the Trade Agreements when and if the Debtors determine that it is appropriate to do so. Regardless of whether a Trade Agreement has been executed, if any party accepts payment and does not continue supplying goods or services to the Debtors in accordance with the trade terms at least as favorable to the Debtors as those practices and programs in place historically, prior to the Petition Date, then (a) any payment on account of a prepetition claim received by the party will be deemed in the Debtors' discretion, an improper postpetition transfer and, therefore, immediately recoverable by the Debtors in cash upon written request by the Debtors, and (b) upon recovery by the Debtors, any prepetition claim of the party will be reinstated as if the payment had not been made. A final hearing to consider entry of a final order on the request will be held on January 10, 2011. Any objections or responses must be filed on or before January 4. ----------------------------------------------------------------- [00032] DEBTORS' MOTION TO HONOR PREPETITION EMPLOYEE OBLIGATIONS ----------------------------------------------------------------- See prior entry at [00016]. Judge Robert D. Drain issued an order authorizing the Debtors, on an interim basis, to pay and honor all prepetition obligations associated with their employee obligations and to continue the programs and maintain funding in the ordinary course of business, on account of: (a) Unpaid Compensation, Deductions and Payroll Taxes, Temporary Employee Compensation and Independent Contractor Compensation; (b) Reimbursable Expenses, American Express Corporate Card Expenses, Relocation Program Expenses; (c) the Employee Benefit Programs and the Union Employee Benefit Programs; and (d) the 401(k) Savings Plan and the Multiemployer Pension Plans. Judge Drain held that the Debtors are authorized to pay and honor all prepetition obligations associated with Independent Contractor Compensation, provided that the Debtors will not pay any Independent Contractor more than $11,725. The Debtors and any applicable third parties are authorized to continue to allocate and distribute Deductions and Payroll Taxes to the appropriate third-party recipients or taxing authorities in accordance with the Debtors' stated policies and prepetition practices. The Debtors are also authorized: * to pay all processing and administrative fees associated with and all costs and expenses incidental to payment of the Employee Obligations; and * to continue to honor all obligations to their Union Employees under the terms of existing collective bargaining agreements to which the Debtors are a party to. Pursuant to Section 362(d) of the Bankruptcy Code, (a) Employees are authorized to proceed with their workers' compensation claims in the appropriate judicial or administrative forum under the Workers' Compensation Program, and the Debtors are authorized to pay all prepetition amounts relating to the Program in the ordinary course of business, and (b) the notice requirements pursuant to Rule 4001(d) of the Federal Rules of Bankruptcy Procedure, with respect to clause (a), are waived. This modification of the Automatic Stay pertains solely to claims under the Workers' Compensation Program. The Interim Order and the Debtors' performances under the Order will not constitute the assumption of, or approval of, the Debtors' entry into any executory contract or postpetition agreement. The Debtors' right to contest any claim is fully reserved. A final hearing on the request will be held on January 10, 2011. Any objections or responses must be filed on or before January 4. ----------------------------------------------------------------- [00033] DEBTORS' APPLICATION TO EMPLOY KCC AS CLAIMS AGENT ----------------------------------------------------------------- The Debtors seek the Court's authority to employ Kurtzman Carson Consultants LLC as their notice and claims agent in their Chapter 11 cases. The Debtors note that KCC -- one of the country's leading Chapter 11 administrators, with experience in noticing, claims administration, solicitation, balloting, and facilitating other administrative aspects of Chapter 11 cases -- is fully equipped to handle the volume of mailing involved in properly sending the required notices to, and processing the claims of, creditors in their Chapter 11 cases. As notice and claims agent, KCC will: (a) Notify all potential creditors of the filing of the Bankruptcy petitions and of the setting of the first meeting of creditors, pursuant to Section 341(a) of the Bankruptcy Code; (b) Prepare and serve required notices in the Chapter 11 cases, including notices of the commencement of the Chapter 11cases; the initial meeting of creditors under Section 341(a); objections to claims; and any hearings on a disclosure statement and confirmation of a plan or plans of reorganization; and (c) Maintain an official copy of the Debtors' schedules of assets and liabilities and statement of financial affairs, listing the Debtors' known creditors and the amounts owed to the creditors; (d) Provide access to the public for examination of copies of the proofs of claim or proofs of interest filed in the Chapter 11 cases without charge during regular business hours; (e) Establish accounts with financial institutions in the name of and as agent for the Debtors solely for purposes as required to effect distributions under a plan of reorganization; (f) Furnish a notice of the last date for the filing of proofs of claims and a form for the filing of a proof of claim, after the notice and form are approved by the Court; (g) File with the Clerk's Office an affidavit or certificate of service, which includes a copy of the notice, a list of persons to whom it was mailed, and the date mailed, within 10 days of service; (h) Docket all claims received by the Clerk's Office, maintain the official claims registers for each Debtor on behalf of the Clerk, and provide the Clerk with certified duplicate, unofficial Claims Registers on a monthly basis, unless otherwise directed; (i) Record all transfers of claims and provide any notices of the transfers; (j) Specify in the applicable Claims Register, these information for each claim docketed: (1) the claim number assigned, (2) the date received, (3) the name and address of the claimant and agent, if applicable, who filed the claim, and (4) the classification of the claim; (k) Relocate by messenger all of the actual proofs of claim filed with the Court to KCC, not less than weekly; (l) Upon completion of the docketing process for all claims received to date by the Clerk's Office for each case, turn over to the Clerk copies of the claims register for the Clerk's review; (m) Make changes in the Claims Registers pursuant to any applicable order of the Court; (n) Maintain the official mailing list for each Debtor of all entities that have filed a proof of claim, which list will be available upon request by a party-in-interest or the Clerk; (o) Provide other claims processing, noticing, and administrative services as may be requested from time to time by the Debtors; and (p) File with the Court the final version of the claims register immediately before the close of the Chapter 11 cases. Thirty days prior to the close of the Chapter 11 cases, an order dismissing the Agent will be submitted terminating the services of the Agent upon completion of its duties and responsibilities. At the close of the case, KCC will box and transport all original documents, in proper format, as provided by the Clerk's Office, to the Federal Archives Record Administration, located at Central Plains Region, 200 Space Center Drive, Lee's Summit, in Missouri. In addition, KCC will maintain and update the Debtors' master mailing list of creditors and perform other administrative tasks pertaining to the administration of the chapter 11 cases as may be requested by the Debtors or the Clerk's Office. In exchange for its services, the Debtors intend to pay KCC at the rates or prices set by KCC, and in effect as of the date of the parties' agreement, in accordance with KCC's Fee Structure. The Debtors also intend to reimburse KCC for its reasonable out- of-pocket expenses. The Debtors believe that the fees and expenses incurred by KCC are administrative in nature and should not be subject to the standard fee application procedures for professionals. Prior to the Petition Date, the Debtors paid KCC a retainer of $75,000. Additionally, under the terms of the parties' engagement letter, the Debtors have agreed to indemnify and hold harmless KCC, its affiliates, members, directors, officers, employees, consultants, subcontractors, and agents from and against any and all losses resulting from their performance under the Engagement Letter. The indemnification will exclude, however, losses resulting from KCC's bad faith, negligence, gross negligence, willful misconduct, or any action or inaction by KCC which constitutes a material breach of the Engagement Letter. KCC Vice President of Corporate Restructuring Services Albert H. Kass assures the Court that KCC neither holds nor represents any interest adverse to the Debtors' estates in connection with any matter on which it would be employed and that it is a "disinterested person," as referenced in Section 327(a) of the Bankruptcy Code and as defined in Section 101(14), as modified by Section 1107(b). ----------------------------------------------------------------- [00034] SAFEWAY, FOOD LION, STOP & SHOP MAY BID FOR A&P STORES ----------------------------------------------------------------- Safeway, Food Lion and the Dutch company that owns Stop & Shop are among the likely bidders for some of The Great Atlantic & Pacific Tea Company, Inc.'s stores, reports Sarah Portlock of The Star-Ledger. The report notes that real estate holdings will be a big factor in A&P's reorganization as the Company is expected to sell some of its valuable real estate properties as it reorganizes. These are "tools . . . for them to work with their financial advisers and attorneys to try to put together a plan of reorganization," the report quotes David Gordon, a commercial real estate lawyer with the Woodbridge firm Wilentz, Goldman and Spitzer, as saying. Retail broker Chuck Lanyard, president of the Goldstein Group in Paramus, said his firm recently began handling some of the A&P's listings. "Many of these locations are in good, solid neighborhood locations, which makes them desirable," he said. "I can see that by the activity we're handling." Mr. Stone said the future of these properties could go three ways -- competitors or other types of grocers could snatch up the spaces; the spaces could go to retailers who don't compete with grocers but need large spaces, like electronics or discount stores; or an investor could come in and reposition a property to attract other types of tenants, relates the report. It will be difficult to determine each property's value because every scenario is unique, he added. A&P spokeswoman Lauren LaBruno declined to comment on the specifics of the company's real estate decisions, but it said it is evaluating its options. "We continually analyze our store portfolio and business and will do so under Chapter 11," Ms. LaBruno was quoted by The Star-Ledger as saying. Citi analyst Susan Anderson said in a research note that Royal Ahold, which operates Stop & Shop markets, and Delhaize Group, which operates Food Lion, may be contenders for some of the company's valuable real estate, notes the report, adding that Safeway may also look to acquire some of A&P's stores to complement its Genuardi's business in the Northeast. ----------------------------------------------------------------- [00035] CITIGROUP LOWERS RATING ON A&P TO 'SELL', SAYS WSJ ----------------------------------------------------------------- Citigroup has downgraded its rating on The Great Atlantic & Pacific Tea Company, Inc., to "sell" from "hold," according to The Wall Street Journal's Shira Ovide. Citigroup had a $3 price target on A&P, says the report. The stock price ended trading on Friday at 93 cents amid reports that the supermarket chain was prepping a bankruptcy filing. The Journal relates that Citigroup said A&P's Chapter 11 filing "could be good for the food retail industry if it accelerates consolidation in a heavily saturated food retail market." According to Citigroup, Ahold's Stop & Shop grocery chain has the most store overlap with A&P's stores, followed by SuperValu, notes the Journal. *** End of Issue No. 3 ***