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Fairway Group Holdings Chapter 11 Petition, Plan Filed

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According to the U.S. Bankruptcy Court docket, Fairway Group Holdings and 25 affiliated Debtors filed for Chapter 11 protection in Manhattan. The Company also announced an agreement with its senior secured lenders holding more than 70% of its senior secured debt on the terms of a reorganization that will eliminate approximately $140 million of senior secured debt and provide financing to restructure the Company’s balance sheet.

Concurrent with its Chapter 11 petition, Fairway Group Holdings also filed a Joint Prepackaged Chapter 11 Plan of Reorganization and related Disclosure Statement. Under the Plan, holders of general unsecured claims–including suppliers, employees, unions and all other trade creditors–will receive payment in full on account of existing obligations. Further, the five collective bargaining agreements between Fairway Group Holdings and each of the unions will be assumed under the Plan and remain in full force and effect. All of the Company’s outstanding shares of common stock will be cancelled pursuant to the Plan with no distribution to holders thereof.

As a part of the Plan, the Company entered into an agreement with certain holders of its senior secured loans. Supporting lenders agreed to vote in favor of the Plan and exchange their loans for common equity and $84 million of debt of the reorganized company. Successful implementation of the Plan would result in a substantial conversion into equity of the Company’s $279 million of senior secured loans.

Fairway Group Holdings is seeking Court approval to enter into a $55 million super-priority secured debtor-in-possession credit facility and a $30.6 million letter of credit facility to cover outstanding letters of credit, which will be provided by certain of the Company’s existing senior secured lenders. In addition, the Company has also secured a commitment from its current lenders to convert the amounts extended under the D.I.P. loan to an exit loan.

Fairway Group Holdings C.E.O., Jack Murphy, comments, “We believe that implementing this Prepackaged Plan is the best opportunity for Fairway to restructure its balance sheet on an expedited basis, strengthen its operations, retain jobs and create long-term value, while continuing to provide customers with the best food experience in the greater New York area.” Read more bankruptcy news.