Burkle to Chair A&P Under Buyout Plan

JON SPRINGER

MONTVALE, N.J. — Ron Burkle, the supermarket magnate who heads California investment company Yucaipa Cos., would serve as the new chairman of the board of A&P here under a proposed buyout plan filed Thursday.

The proposed new board of directors would also include two designees each from Goldman Sachs Asset Management and Mount Kellett Capital Management; one director selected by the United Food and Commercial Workers union; and A&P’s chief executive officer, Sam Martin. The former two companies are combining with Yucaipa on a $490 million deal to buy A&P out of U.S. Bankruptcy Court and operate it as a privately held company, as reported first in SN Thursday. The plan is predicated upon savings as a result of a new labor deal with the UFCW, which has yet to be reached.

The current board of directors would be dissolved under the plan.

In court papers detailing the transaction, A&P said the investors — identified as Yucaipa and holders of about 80% of A&P’s convertible notes — would purchase $210 million in new second lien notes (at a 5% discount); $210 million in new convertible third lien notes; and $80 million in shares of the reorganized company’s stock. The proceeds would provide enough to pay secured creditors fully in cash, give A&P money to continue its turnaround and provide a $40 million pool for cash distributions to unsecured creditors. The latter group — mostly bondholders — would receive an average of about 1.6 cents on the dollar, based on approximately $2.5 billion in unsecured debt.

The investment is subject to the approval of the court and any competing offers. A&P has asked the court to hold a hearing on the investment Nov. 14.

A&P said the investment should be approved in part because it would expedite confirmation of a plan of reorganization, which it said was “critical” given financing requirements and a deadline at year-end to assume or reject around 100 store leases.