GRAND UNION SETS EXIT FROM CHAPTER 11

ELLIOT ZWIEBACH

WAYNE, N.J. -- Grand Union Co. here said last week it expects to complete its financial restructuring and emerge from Chapter 11 bankruptcy next week.

That announcement came after the chain received confirmation last Wednesday of its voluntary, prepackaged plan of reorganization from the U.S. Bankruptcy Court in Newark, N.J.

J. Wayne Harris, chairman and chief executive officer, said, "As a result of the restructuring, we will now have an appropriate capital structure and the necessary financial resources to support Grand Union's profitable growth through an aggressive business strategy.

"Our management team is eager to move ahead with its business plan, which seeks to capitalize on our company's valuable consumer recognition, excellent store locations and other assets to enhance the value of the company over the long term."

It emerged from an earlier bankruptcy in June 1995. Securities analysts told SN they believe next week's emergence will have more positive results.

Bob Lupo, a high-yield analyst with BA Securities, Chicago, said he's optimistic about the new Grand Union's chances for success "because this reorganization is properly structured. For the first time in over 10 years, the company has a flexible capital structure without an onerous debt burden.

"Of course, Grand Union still faces challenges in a very competitive marketplace, but it's now better equipped to compete."

Lupo said the 1995 restructuring left the company with more than $70 million in annual debt payments, "which ate away at its ability to keep up its store base or offer competitive marketing programs because of limited cash flow.

"Now it will have that $70 million-plus freed up for investment in the stores."

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.

In connection with the restructuring, Grand Union said it has entered into an agreement with two investment banks -- Swiss Bank Corp. and Lehman Commercial Paper -- for a $300 million credit facility.

The company said in the disclosure statement 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 cap-ex in 2000, $50.8 million in 2001, $51.4 million in 2002, and $54.2 million in 2003.

The process that led to the latest Chapter 11 filing began unfolding in February when Grand Union officials realized the company would not be able to satisfy a $36 million interest payment due March 2, 1998.

Consequently, the company began negotiations with its secured lenders to obtain waivers to avoid default and to facilitate restructuring.