Fairway Group Holdings Corp has announced a reorganization plan that will cut the company’s debt in half, and help it move out of bankruptcy. The plan was confirmed by Bankruptcy Judge Michael E. Wiles.
"We will emerge from bankruptcy with a stronger balance sheet, $50 million in cash, and the backing and commitment from the senior lenders and new shareholders to re-invest in the future of Fairway," stated CEO Jack Murphy.
Fairway filed for Chapter 11 at the beginning of last month, and this new Plan of Reorganization will reportedly move the company out of bankruptcy during the week of June 20, according to a recent press release. The plan was unanimously accepted by all of its voting secured lenders.
In addition to the sizable reduction of the company’s $140 million debt, the plan will also reduce the annual debt service obligations by up to $8 million. The company’s senior secured lenders will exchange their loans of company debt for new ownership and some reinstated debt. Outstanding shares of common stock will be cancelled with no distribution to holders, stated Fairway.
"We will continue to provide to our customers the best food experience in the greater New York area, and we pride ourselves on continuously improving our product offering while maintaining the freshness and quality our loyal customers have come to expect," stated Jack Murphy, Fairway CEO.
According to the Wall Street Journal, also included in the plan were liability protections from lawsuits after emerging from bankruptcy for the company, its lender, and its executives. After Judge Wiles’ initial comment that liabilities were not a reward for cooperation, Fairway scaled back the size of the liability releases. Dennis Stogsdill, Fairway’s Chief Restructuring Officer, said in court that the releases were an essential part to the negotiations.
Fairway also announced plans to open a new store in Georgetown, Brooklyn, by the end of the year. All 4,000 of the company’s current employees will remain employed, with no collective-bargaining changes being made to unionized workers.
"Thank you to all the customers who have continued to support Fairway. Our stores are open and stronger than ever," finished Murphy.
DeliMarket News will continue to report the company’s integration of this plan and the subsequent state of its Chapter 11 status.