Fairway Group Holdings, the parent company of New York food retailer Fairway Market, reached an agreement with its senior secured lenders holding more than 70% of the company’s 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.
To implement the agreed upon restructuring, Fairway Group Holdings and certain of its subsidiaries have filed a joint prepackaged Chapter 11 plan of reorganization and filed voluntary petitions for protection under Chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York.
The company intends to use the Chapter 11 process to facilitate a financial restructuring designed to restore Fairway to long-term financial health while continuing to operate in the normal course of business without interruption.
As a part of the prepackaged plan, the company entered into an agreement with certain holders of the company’s senior secured loans. Supporting lenders agreed to vote in favor of the company’s prepackaged plan and exchange their loans for common equity and $84 million of debt of the reorganized company. All other prepetition creditors will not be impaired and will be paid in in the ordinary course. Successful implementation of the proposed plan would result in a substantial conversion into equity of the company’s $279 million of senior secured loans.
In conjunction with its filing, the company is seeking approval to enter into a $55 million super-priority secured debtor-in-possession (DIP) 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. The proposed DIP financing will help support Fairway’s reorganization plans and enable normal post-petition operation of its business, including timely payment of employee wages, benefits and other obligations on an uninterrupted basis. Credit Suisse AG is acting as agent for the lenders.
The company has also secured a commitment from its current lenders to convert the amounts extended under the DIP loan to an exit loan. The company has filed a number of customary first day motions with the bankruptcy court to support ongoing operations.
“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,” said Jack Murphy, CEO. “Over 80 years ago, Fairway started as a fresh fruit and veggie stand at the corner of 74th and Broadway. It grew into the greatest food store in the country. Fairway is famous for apples stacked to the ceiling, olives straight from Italy, New York style bagels, hand-sliced smoked salmon, prime beef and specialty imports. Nobody slices a fish or boils a bagel like us. Nobody.”