================================================================= ATLANTIC & PACIFIC BANKRUPTCY NEWS Issue Number 4 ----------------------------------------------------------------- Copyright 2010 (ISSN XXXX-XXXX) December 17, 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 ------------- [00036] A&P OFFERS PRICING ON $800-MIL. OF BANKRUPTCY LOANS [00037] A&P STORES TO REMAIN OPEN THROUGH BANKRUPTCY [00038] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CH. 11 CASES [00039] DEBTOR'S MOTION TO EXTEND DEADLINE TO FILE SCHEDULES [00040] DEBTORS' MOTION TO CONTINUE CUSTOMER PROGRAMS [00041] DEBTORS' MOTION TO PAY WAREHOUSING CHARGES, LIEN CLAIMS [00042] DEBTORS' MOTION TO HONOR DEPOSIT, TRUST FUND OBLIGATIONS [00043] DEBTORS' MOTION TO ESTABLISH PROTOCOL TO PROTECT NOLS [00044] DEBTORS' MOTION TO PAY PREPETITION SALES AND USE TAXES [00045] DEBTORS' MOTION TO ESTABLISH CASE MANAGEMENT PROCEDURES [00046] DEBTORS' 1ST OMNIBUS MOTION TO REJECT UNEXPIRED LEASES [00047] DSS, PESCANOVA FILE NOTICES OF RECLAMATION DEMAND [00048] RELATIVELY HIGH SHORT INTEREST DETECTED IN A&P SHARES KEY DATE CALENDAR ----------------- 12/12/10 Voluntary Chapter 11 Petition Date 01/11/10 Deadline to File Schedules of Assets and Liabilities 01/11/10 Deadline to File Statement of Financial Affairs 01/11/10 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 ----------------------------------------------------------------- [00036] A&P OFFERS PRICING ON $800-MIL. OF BANKRUPTCY LOANS ----------------------------------------------------------------- See prior related entry at [00009] (A&P Obtains Interim Approval of $800MM DIP Financing). The Great Atlantic & Pacific Tea Co. offered initial price guidance on $800 million of loans it is seeking to fund operations, according to a December 15, 2010 report by Bloomberg News. JPMorgan Chase & Co. is arranging the debtor-in-possession financing consisting of a $350 million term loan and a $450 million asset-backed revolving credit line. A&P is proposing to pay term-loan lenders an interest rate 7.5 percentage points more than the London interbank offered rate, Bloomberg News reported, citing people familiar with the matter. Libor, the rate banks charge to lend to each other, will have a 1.75 percent floor. A&P is proposing to issue the loan at 98 cents on the dollar, which would reduce proceeds for the company and increase the yield for investors, according to the report. The revolving loan will have a spread of 3 percentage points over Libor. A&P will pay a fee of 0.5 percent on the unused portion of the credit line, Bloomberg News reported. Lenders have until today, to file responses to JPMorgan. ----------------------------------------------------------------- [00037] A&P STORES TO REMAIN OPEN THROUGH BANKRUPTCY ----------------------------------------------------------------- See prior related entry at [00009] (A&P Obtains Interim Approval of $800MM DIP Financing). A spokeswoman for Great Atlantic & Pacific Tea Co. said that A&P, Super Fresh and Food Emporium supermarkets in southwestern Connecticut will remain open for the time being after the company won approval to obtain a $800 million loan, according to a December 15, 2010 report by Connecticut Post. Earlier, the U.S. Bankruptcy Court for the Southern District of New York, which oversees the Chapter 11 cases of A&P and its affiliated debtors, approved the proposed debtor-in-possession financing arranged by JPMorgan Chase & Co. A&P spokeswoman Lauren La Bruno said the financing is a strong vote of confidence in the company. "Our stores will continue to operate normally, and you can expect the same level of quality service you have come to expect," Connecticut Post quoted Ms. La Bruno as saying. The company operates 395 stores under the names A&P, Waldbaum's, Pathmark, Best Cellars, The Food Emporium, Super Fresh and Food Basics. Ms. La Bruno said A&P can make strategic decisions that will benefit the company over the long term with the new financing. "This will enable A&P to emerge with a new capital structure and in a much better position to deploy our fundamental strengths," Connecticut Post quoted Ms. La Bruno as saying. Kevin Coupe, editor of MorningNewsBeat.com, an online publication covering the retail and food industries, however, sees differently. He said the company may be facing a challenge as basic as enticing customers to its stores, Connecticut Post reported. "The biggest problem is that they don't have stores that are particularly compelling -- if you have other options. They're competing with a lot of people in a lot of segments," Connecticut Post quoted Mr. Coupe as saying. He further said that he does not expect the company to exit bankruptcy in its current configuration. Founded in 1859, A&P at one time had 16,000 stores. In the 1970s, the company was hit by competition, forcing it to shut down many of its stores. The purchase of the Pathmark chain in 2007 for $679 million added to its financial burden, according to the Connecticut Post report. ----------------------------------------------------------------- [00038] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CH. 11 CASES ----------------------------------------------------------------- See prior entry at [00007]. Motion granted. ----------------------------------------------------------------- [00039] DEBTOR'S MOTION TO EXTEND DEADLINE TO FILE SCHEDULES ----------------------------------------------------------------- See prior entry at [00008]. The Court gave the Debtors until January 11, 2011, to file their schedules of assets and liabilities and statements of financial affairs. ----------------------------------------------------------------- [00040] DEBTORS' MOTION TO CONTINUE CUSTOMER PROGRAMS ----------------------------------------------------------------- See prior entry at [00017]. Judge Robert Drain issued an interim order authorizing the Debtors to maintain and administer their customer programs. Judge Drain authorized all financial institutions where the Debtors' accounts are maintained to pay any checks presented and to honor all fund transfer requests made by the Debtors to the extent there are sufficient funds available in those accounts. The financial institutions were also authorized to accept and rely on all representations made by the Debtors with respect to which checks, drafts, wires or automated clearing house transfers should be honored or dishonored in accordance with the interim order or any other court order, whether those are dated before, on or after December 12, 2010, without any duty to inquire otherwise and without any liability for relying on the Debtors' representations. The deadline for filing objections to the final approval of the Debtors' request is January 4, 2011. ----------------------------------------------------------------- [00041] DEBTORS' MOTION TO PAY WAREHOUSING CHARGES, LIEN CLAIMS ----------------------------------------------------------------- See prior entry at [00019]. Judge Robert Drain issued an interim order authorizing the Debtors to earmark up to $240,000 to pay warehousing services and up to $3.4 million to pay so-called "miscellaneous lien claimants." In a December 14 order, Judge Drain held that the payment of warehousing services is conditioned upon the continued supply of those services to the Debtors on trade terms. Meanwhile, the Debtors are not authorized to pay miscellaneous lien claims unless the person who asserts those claims has perfected and is capable or may be capable of perfecting liens with respect to those claims. The Debtors may condition payment of miscellaneous lien claims on the agreement of claimants to continue supplying goods and services on the same trade terms given to them prior to December 12, 2010, or upon new trade terms, according to the court order. In case a miscellaneous lien claimant fails to comply with the agreed terms, the Debtors may cause any payment made to that claimant to be deemed to have been in payment of then outstanding postpetition obligations owed to that claimant. The miscellaneous lien claimant will also be required to repay the Debtors on account of its claim if the aggregate amount of the Debtors' payments exceeds the postpetition obligations then outstanding without the right of set-off, provision for payment of reclamation or trust fund claims, or otherwise. All undisputed amounts owed by the Debtors arising from the postpetition delivery of merchandise are deemed postpetition administrative expense claims. The Debtors may pay those amounts in the ordinary course of business consistent with the customary practices in effect prior to their bankruptcy filing, according to the December 14 order. To the extent that any of those undisputed amounts also constitute claims under the Perishable Agricultural Commodities Act of 1930, that amount will not be subject to the PACA procedures but will be paid in the ordinary course of business. The December 14 order also authorized the Debtors to reconcile and to pay any allowed PACA claims in accordance with the PACA procedures. Pending completion of the PACA procedures, holders of PACA claims are prohibited from taking any action to establish the validity and amount of their claims, according to the order. Judge Drain will consider final approval of the Debtors' request at the hearing scheduled for January 10, 2011. The deadline for filing objections is January 4, 2011. ----------------------------------------------------------------- [00042] DEBTORS' MOTION TO HONOR DEPOSIT, TRUST FUND OBLIGATIONS ----------------------------------------------------------------- See prior entry at [00020]. The Debtors obtained interim court approval to pay all prepetition lottery proceeds to state lottery agencies; gift proceeds to Blackhawk Marketing Services Inc.; wire transfer funds and money order funds to Western Union North America; and the proceeds from the sale of consigned goods. The interim order dated December 14, 2010, also authorized all financial institutions where the Debtors accounts are maintained to honor and pay all checks presented for payment and to fund all transfer requests made by the Debtors to the extent there are sufficient funds available in those accounts. The Court will consider final approval of the Debtors' request at the hearing scheduled for January 10, 2011. The deadline for filing objections is January 4, 2011. ----------------------------------------------------------------- [00043] DEBTORS' MOTION TO ESTABLISH PROTOCOL TO PROTECT NOLS ----------------------------------------------------------------- See prior entry at [00026]. The Debtors obtained an interim order establishing notification and hearing procedures for: (i) the 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. Any purchase, sale or other transfer of, or declaration of worthless stock deduction with respect to equity securities in The Great Atlantic & Pacific Tea Company Inc. or of any beneficial interest therein in violation of the procedures will be null and void ab initio, according to the interim order dated December 15, 2010. The interim order does not apply to the 5.125% convertible senior notes due 2011, and the 6.75% convertible senior notes due 2012, which were issued by The Great Atlantic & Pacific Tea Company Inc. The Court will consider final approval of the Debtors' request at the hearing scheduled for January 10, 2011. The deadline for filing objections is January 4, 2011. ----------------------------------------------------------------- [00044] DEBTORS' MOTION TO PAY PREPETITION SALES AND USE TAXES ----------------------------------------------------------------- See prior entry at [00027]. The Debtors obtained interim court approval to earmark as much as $14 million to pay their prepetition taxes, business license and other fees. The interim order authorized financial institutions where the Debtors' accounts are maintained to honor and pay all checks presented for payment and fund all transfer requests made by the Debtors. It also permitted those institutions to rely on the Debtors' representations as to which checks and transfers are authorized to be paid without further inquiry and liability for following the Debtors' instructions. The final hearing on the proposed payment of taxes will be held on January 10, 2011. The deadline for filing objections is January 4, 2011. ----------------------------------------------------------------- [00045] DEBTORS' MOTION TO ESTABLISH CASE MANAGEMENT PROCEDURES ----------------------------------------------------------------- See prior entry at [00029]. Judge Robert Drain issued an order providing for certain notice, case management and administrative procedures in the Debtors' Chapter 11 cases. The court order authorized Kurtzman Carson Consultants LLC to establish a case Web site available at http://www.kccllc.net/aptea where electronic copies of all pleadings filed may be posted, among other things. The court order set January 10, 2011 for the first omnibus hearing in the Debtors' bankruptcy cases. ----------------------------------------------------------------- [00046] DEBTORS' 1ST OMNIBUS MOTION TO REJECT UNEXPIRED LEASES ----------------------------------------------------------------- See prior entry at [00030]. Motion granted. ----------------------------------------------------------------- [00047] DSS, PESCANOVA FILE NOTICES OF RECLAMATION DEMAND ----------------------------------------------------------------- Direct Source Seafood LLC and Pescanova Inc. seek to reclaim $1,506,070 worth of goods from The Great Atlantic & Pacific Tea Company, Inc. Direct Source seeks to reclaim $317,348 worth of goods while Pescanova demands the return of $1,188,722 worth of goods sold to A&P. The goods were reportedly sold in the ordinary course of business and delivered on credit terms to, and received by, A&P during the 45 days prior to its bankruptcy filing. Direct Source and Pescanova argued that the company was insolvent at the time it received the goods. ----------------------------------------------------------------- [00048] RELATIVELY HIGH SHORT INTEREST DETECTED IN A&P SHARES ----------------------------------------------------------------- The Great Atlantic & Pacific Tea Co. is among the five companies in the Food Retail industry with relatively high short interest ratio, according to a December 14, 2010 report by Zacks.com. A higher short interest ratio may indicate the potential for a sizeable short squeeze, says the report. Zacks.com says A&P has a short interest ratio of 18.5 based on average daily volume of 831,000 shares and 15.4 million shares short. That equates to 27.4% of the 56.3 million shares outstanding, Zacks.com reported. The company is followed by Ruddick, which has a short interest ratio of 14.4 based on average daily volume of 221,000 shares and 3.2 million shares short. This equates to 6.5% of the 49.1 million shares outstanding, Zacks.com reported. Safeway, which has a short interest ratio of 5.6 based on average daily volume of 4 million shares and 26.5 million shares short, ranks third. It is followed by The Pantry, which has a short interest ratio of 5.5 based on average daily volume of 132,000 shares and 733,000 shares short, and by Casey's General Stores, which has a short interest ratio of 5 based on average daily volume of 449,000 shares and 2.2 million shares short, according to the report. *** End of Issue No. 4 ***