Bashas' close to bankruptcy financing deal - East Valley Tribune: Business

Bashas' close to bankruptcy financing deal

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Posted: Thursday, May 13, 2010 9:34 am

Bashas' Inc. is close to securing new financing that would allow it to emerge from bankruptcy protection by midsummer, a lawyer for the Arizona grocer said Thursday.

The company plans to take out $200 million in new financing to allow Bashas' to fully repay banks and insurance companies holding about $215 million in debt, Bashas' lawyer Michael McGrath told Judge James Marlar in a bankruptcy court teleconference hearing held from Phoenix and Tucson.

Bashas' would use cash on hand to pay the balance to lenders that's not included in the new loan deals, which could use traditional financing or senior notes.

The deal would also allow unsecured creditors owed about $60 million to be paid in full over about five years. About 60 percent of that amount would be paid when the company emerges from bankruptcy, McGrath said.

Negotiations on terms of repayment to the lenders had been holding up a planned reorganization approved by most other creditors.

But in recent weeks, the company has been talking to two investment banking groups about new financing that would pay off the lenders, and they are close to a deal, McGrath said.

Bashas' has shuttered stores, laid off employees and cut other costs, and it's now profitable. It has amassed about $90 million in cash since filing for Chapter 11 bankruptcy protection in July 2009.

The improvements in the company's financial position coincided with the sudden availability of capital in the private credit markets.

"This is a fortuitous turn of events that after 2½ years the capital markets start percolating at the same time that Bashas' improved its finances," McGrath told Marlar.

Marlar, the chief federal bankruptcy judge in Arizona, agreed that securing new financing has been difficult for many companies in bankruptcy.

"Over the past 2-2½ years, I haven't heard the words 'exit financing' in this court," Marlar said.

The company now expects to be able to emerge from bankruptcy protection by July or August at the latest.

"We view these developments as a very good sign that Bashas' is on its way to successfully emerging from Chapter 11," said Jim Cross, an attorney representing the secured creditors, which are primarily suppliers and other vendors. "We think it will be a healthier company, a more successful and competitive company."

The family owned company, based in Chandler, Ariz., had been stung by the global credit crisis, slowing growth and the hyper-competitive Phoenix-area grocery market.

It closed 31 of its more than 155 stores, cut about 1,000 workers and renegotiated store leases to slash costs after filing for reorganization.

Besides Bashas' stores, the company operates Food City, which caters to Hispanic shoppers, and high-end grocer AJ's Fine Foods. Nearly all of the stores are in Arizona.

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