GRAND UNION ANTICIPATING $75 MILLION INVESTOR LOAN

ELLIOT ZWIEBACH

WAYNE, N.J. -- Grand Union Co. here last week was anticipating a $75 million loan from a pair of new investors that would provide some breathing room to get its operations back in shape.

While the company declined to confirm that the cash infusion was forthcoming, a spokesman for one of the chain's equity investors said last week negotiations with the potential new investors were likely to reach a positive conclusion at any time.

Grand Union officials did indicate last week the company will announce financial results for the first quarter ended July 19 sometime next week -- a couple of weeks later than industry analysts had expected the results to be issued.

If Grand Union gets the $75 million loan, analysts told SN, one immediate benefit would be to enable the company to make a $36 million cash payment next Tuesday to holders of its 12% senior subordinated notes due 2004.

The loan is expected to come from a pair of hedge-fund investors -- Soros Fund Management, a New York-based investment adviser to several offshore international investment vehicles, and Cargill Corp., a Minneapolis-based commodity investor -- which have bought up approximately one-third of Grand Union's $204 million senior credit facility.

Grand Union's two primary equity investors since its 1995 emergence from Chapter 11 bankruptcy protection are Trefoil Capital Investors, an investment fund managed by Shamrock Capital Advisors, Burbank, Calif., and GE Investment Private Placement Partners II, an affiliate of General Electric Investment Corp., Stamford, Conn.

Clifford Miller, managing director of Shamrock and a Grand Union director, told SN his company and GE have had conversations with Soros and Cargill for several weeks as part of the chain's ongoing discussions with its banks and other lenders. He said last week the loan agreement was close to being completed.

Miller said the $75 million would be used "for general corporate purposes, including a portion to make the coupon payment. But since Grand Union is generating cash flow, how we spend the rest will depend on what management determines would be the highest purpose."

Miller said Wayne Harris, Grand Union's newly installed chairman and chief executive officer, is in the process "of thinking through the strategies that will make the most sense." A Grand Union spokesman declined to comment on reports of the $75 million loan, explaining, "When it's proper to make an announcement, we will do so. Until then, we don't comment on speculation."

Analysts told SN that Soros and Cargill would be in line to realize a short-term profit on their investment by receiving a hefty fee from Grand Union for advancing the money. The investors could also benefit if they have purchased Grand Union bonds, since the bond price is likely to rise as the company strengthens its operations, the analysts told SN last week.

Representatives of GE could not be reached for comment last week, nor could executives at Cargill. A spokesman for Soros said the company declined comment.

Ted Bernstein, a high-yield analyst with Grantchester Securities, a division of Wasserstein Perella Securities, New York, said Grand Union would use some of the money to make its Sept. 2 coupon payment, "with the balance earmarked for capital projects and running the business.

"Overall, what the money does is it gives Grand Union more liquidity at a time it really needs it."

According to Howard Goldberg, an analyst with Smith Barney, New York, adding $75 million to Grand Union's debt "is hardly a solution to its problems. But it may buy the company time to make other moves, and time is very valuable to Grand Union right now.

"And if your choice is making the coupon payment by adding additional debt or missing the coupon payment, then adding the debt makes sense."