PREPACKAGED CHAPTER 11 FILED BY KASH N' KARRY

ELLIOT ZWIEBACH

TAMPA, Fla. -- Kash n' Karry Food Stores here filed a prepackaged Chapter 11 petition last week in U.S. Bankruptcy Court for the District of Delaware following approval of the company's reorganization plan by its bondholders. The move marks a major step in the chain's efforts to rise from under a heavy debt load and improve its competitive position, observers said. A confirmation hearing for court approval of the plan is scheduled for Dec. 12, after which the chain, which operates 99 food stores in west and central Florida, expects to complete its restructuring and emerge from Chapter 11 before the end of the year. Under the reorganization plan, Kash n' Karry will be able to reduce its total debt of $350 million by about one-third; lower bond indebtedness by $105 million; provide for an equity infusion of $10 million, and lower annual interest expense by more than one-third, or about $12 million, a spokesman for the chain said. According to Tony Petrillo, acting chairman and chief executive officer, "The overwhelming support the plan has received

from our bondholders is a significant victory for the company. "We can now move quickly to implement our restructuring plan, which will dramatically improve the company's financial condition and enable us to return the business to full strength by restoring our forward-buy inventory management program and undertaking store remodeling and construction projects." The spokesman told SN the chain plans to remodel six to 10 stores over the next 12 months, although he declined to pinpoint plans for new-store construction. Kash n' Karry completed five store remodels earlier this year, he noted. Petrillo said the filing of the prepackaged reorganization "will not disrupt service to our customers nor affect our relationships with our vendors." The spokesman said the company has received permission from the bankruptcy court to pay all prepetition claims of each trade creditor who agrees to continue to supply products or services on customer trade terms and to pay all post-petition claims of trade creditors in full "on a timely basis." Petrillo joined Kash n' Karry last August following the departure of Ronald J. Floto, who was chairman and chief executive officer. At that time, bondholders and the company agreed to restructure the chain's debt and equity.

A New York securities analyst said Kash n' Karry's prospects following its emergence from Chapter 11 look good. "It looks like it will be a very positive situation for the company and for the bondholders because the filing has clarified the company's financial situation," he said.

"Now Kash n' Karry will be able to operate in a post-bankruptcy world with a lot less debt and a tighter management overview."