WAYNE, N.J. -- Grand Union Co. here said last week it filed for voluntary prepackaged bankruptcy under Chapter 11, and the court has set a hearing date of Aug. 5 to confirm the company's reorganization plan.
Once the plan has been confirmed, the court will set a date two to three weeks later for the company to formally emerge from bankruptcy. The company has previously stated it expects to emerge in mid- to late August.
Grand Union's filing the prepackaged Chapter 11 in U.S. Bankruptcy Court in Newark, N.J., follows an overwhelmingly positive vote by senior noteholders and preferred shareholders for a proposed reorganization plan.
According to the company, more than 72% of senior noteholders and all preferred stockholders voted in favor of the plan, which would exchange existing senior notes for common shares of the reorganized company; exchange existing common stock for five-year warrants, and exchange existing preferred stock for five-year and four-year warrants.
In conjunction with the plan, the company previously said it has signed a firm, underwitten commitment letter from two investment banks -- Swiss Bank Corp. and Lehman Commercial Paper, Inc. -- for a $300-million credit facility, which will become available upon consummation of the reorganization plan.
J. Wayne Harris, chairman and chief executive officer, said, "We are extremely pleased with the results of the vote, which demonstrate overwhelming support for our capital restructuring and our business plan to grow our company.
"We are confident that when the restructuring is completed, the new Grand Union will be in a strong position to grow its sales and profitability over the long term.
"Our management team has developed an aggressive strategy for our future, including a major capital development program to upgrade and enhance our store base, and we look forward to proceeding quickly with these plans."
According to projections in a disclosure statement the company issued last month, Grand Union envisions a gradual five-year turnaround, with a 25% increase in sales, a doubling of operating cash flow and a return to profitability by 2003.
The company said in the disclosure statement that it expects to boost capital spending in 1999 by 68%, to $67 million, compared with $39.7 million spent in fiscal 1998. It also said it plans to allocate $68.6 million to capital expenditures in 2000; $50.8 million in 2001; $51.4 million in 2002, and $54.2 million in 2003.
According to the disclosure statement, "Grand Union has determined that to maximize profitability, it should expand its existing store base, including the development of new stores and the remodeling of existing units; implement a program for maximizing advertising and promotion allowance revenues from the company's suppliers, and perform ongoing evaluation and, when appropriate, close or modify store locations that are not providing adequate levels of contribution to operating performance."
Grand Union operates 222 stores, including 123 in New York, 41 in Vermont, 40 in New Jersey, 13 in Connecticut, three in New Hampshire and two in Pennsylvania.
The company had emerged from an earlier Chapter 11 bankruptcy in June, 1995. However, when it realized that it would not be able to satisfy a $36-million interest payment due March 2, 1996, the company began negotiations in February with its secured lenders to obtain waivers to avoid default and to facilitate restructuring.