MEGAFOODS FILES NEW PLAN FOR CHAPTER 11 EXIT

ELLIOT ZWIEBACH

MESA, Ariz. -- Megafoods Stores here hopes to emerge from Chapter 11 bankruptcy protection by late June under an amended joint plan of reorganization and proposed disclosure statement filed with the U.S. Bankruptcy Court in Phoenix last week.

A hearing on the disclosure statement is scheduled for April 9, according to the company. If it is approved, the company said it would send ballots to Megafoods' creditors for approval, along with the disclosure statement and the first amended joint plan. If those are approved, a confirmation hearing would be set for "as early as late June," the company reported.

Megafoods operates 17 price-impact Megafoods stores in Arizona and 21 conventional Handy Andy stores in the San Antonio area. It has been operating under Chapter 11 since Aug. 17, 1994.

The company filed its original reorganization plan with the court in December. Under that plan, it expects to open up to three new stores in Arizona and two in Texas annually over the next five years.

Megafoods said last week it is negotiating with its two major suppliers -- Certified Grocers of California, Los Angeles, for Arizona and Grocers Supply Co., Houston, for Texas -- for post-confirmation trade credit as well as additional financing for anticipated growth and other capital needs.

The company said it is confident "that all these financing arrangements will be successfully concluded well in advance of the confirmation hearing." The first amended joint plan anticipates that the reorganized company would enter into a three-year revolving line of credit for its working capital needs, Megafoods officials added. Under the plan announced last week:

Each of Megafoods' prepetition secured creditors would receive cash and/or notes or other property in the full amount of its allowed secured claim.

General unsecured creditors, including holders of approximately $100 million in 10.25% notes due in 2000, would receive stock in the reorganized company.

Vendors with valid claims would receive cash in the full amount of those claims.

All priority and administrative claims would be paid in full, either in cash or notes, as provided by the Bankruptcy Code. The company said in the disclosure statement that the Official Committee of Unsecured Creditors, made up of vendors and other creditors but not shareholders, supports the joint plan.