SYRACUSE, N.Y. — Penn Traffic here on Wednesday said it entered into a forbearance agreement with its lenders after committing what it termed as a "technical default" on its loans. The retailer also engaged a crisis management firm, Conway Del Genio Gries & Co., and installed a representative of that firm, Ronald F. Stengel, as its chief restructuring officer effective immediately.
Under the forbearance agreement, lenders led by GE Capital have agreed not to proceed with remedies related to the default until Nov. 25, and will make credit available to Penn Traffic according to a budget expected to be delivered next week.
Penn Traffic in a government filing said the loan default stemmed from "alleged overstatements of the value of certain machinery and equipment in the company's borrowing base certificates."
"We continue to work closely with our lenders and appreciate the flexibility that they have provided us with this latest agreement," Gregory J. Young, president and chief executive officer of Penn Traffic, said in a statement. The company said it expected to continue to receive service from its primary wholesaler, C&S Wholesale Grocers, without interruption.
Conway Del Genio Gries (CDG) is a New York-based financial advisory firm that previously worked with Penn Traffic from October 2006 through December of last year. It was engaged by Penn Traffic again last month. Stengel is a veteran restructuring officer who previously held interim executive roles with Adelphia Communications, Wolf Camera, American Pad and Paper, Reading China & Glass, Smith Corona, FlexTek, Towle Manufacturing, Rytex, Town & Country, Global Home Products, GEO Specialty Chemicals, and Texscan.
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