SCHENECTADY, N.Y. — Price Chopper here filed a lawsuit against Penn Traffic Co. last week alleging breach of contract after a bankruptcy judge approved the sale of Penn Traffic to Tops Friendly Markets, Williamsville, N.Y., according to reports.
The sale of Syracuse, N.Y.-based Penn Traffic to Tops for $85 million plus additional considerations was expected to close late last week.
Price Chopper said it had reached an agreement with Penn Traffic to buy 22 of its P&C locations for $54 million soon after Penn Traffic filed for bankruptcy protection in November.
Tops, meanwhile, with the resources of parent company Morgan Stanley Private Equity, filed a bid to acquire all 79 of Penn Traffic's stores a few weeks later. Although Tops' bid was lower on a per-store basis, creditors decided to get behind it, perhaps because they felt it would end up recouping more money in total, observers told SN.
“It was a heroic effort by both Price Chopper and by Tops,” said Burt P. Flickinger III, managing director, Strategic Resource Group, New York. “The implications of this are that between 7,500 and 10,000 jobs will be saved.”
Tops said in a previous court hearing that it planned to close “a handful” of the Penn Traffic stores it is acquiring, according to reports. It is expected to announce some store closings soon.
Additional closures could be announced following further evaluation by Tops and after a 30-day antitrust review by the Federal Trade Commission. Flickinger said he believes there is very little overlap between Tops' locations, which primarily operate in western New York, and those of Penn Traffic, which are largely concentrated in the central part of the state.
According to reports, Price Chopper in its suit is seeking $1.6 million in damages for breach of contract, described as a “break-up fee” for Penn Traffic's cancellation of its agreement.
Neither Penn Traffic nor Price Chopper could be reached for comment last week. Tops also was not available for further comment last week.
Neil Golub, chief executive officer, Price Chopper, previously told SN he thought a lawsuit would be a “waste of time and effort” after local reports said the company did not intend to file a suit.
“The reality was we had a contract with Penn Traffic,” he told SN before the suit was reportedly filed.
Separately, Penn Traffic last week filed an operating statement with the bankruptcy court in Wilmington, Del., listing total negative cash flow — including bankruptcy-related expenses — totaling $4.48 million for the four-week period from Nov. 29 to Dec. 26 of last year, or roughly its first month in bankruptcy. Before bankruptcy expenses, the operating cash flow loss was $2.33 million.
Revenues for the period, including both cash-register sales and proceeds from other revenues, totaled $65.28 million.
To date under bankruptcy, Penn Traffic reported total cash-flow losses of $4.55 million from revenues of $89.91 million.