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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 24, 1995
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THE GRAND UNION COMPANY
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(Exact Name of Registrant as Specified in Charter)
Delaware 33-59438 22-1518276
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(State of Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.
201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 890-6000
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(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS
On January 24, 1995, The Grand Union Company ("Grand Union") issued
the press release attached hereto as Exhibit A with respect to an agreement in
principle with certain holders of Grand Union debt as to a restructuring of that
indebtedness. The outline of the proposed restructuring terms is attached as
Exhibit B.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
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(Registrant)
Date: January 25, 1995 /s/ Kenneth R. Baum
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Kenneth R. Baum
Senior Vice President,
Chief Financial Officer
and Secretary (Principal
Financial Officer and
Principal Accounting Officer)
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EXHIBIT A
For further information:
Gary D. Hirsch
Chairman of the Board
(914) 921-3000
FOR IMMEDIATE RELEASE
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GRAND UNION ANNOUNCES SUCCESSFUL RESTRUCTURING PLAN
WAYNE, N.J., JAN. 24, 1995 -- The Grand Union Company
announced today that it has reached agreement in principle with its bank lenders
and with the members of informal committees of holders of the Company's Senior
Secured Notes and Senior Subordinated Notes on the terms of a restructuring of
its capital structure. The Company's Senior Secured Notes would receive new
nine-year Senior Notes in a principal amount equal to the principal amount of
Senior Secured Notes presently outstanding ($525 million) plus accrued interest
on the Senior Secured Notes through September 1, 1995. The new Notes would bear
interest, beginning on the earlier of the consummation of the restructuring or
September 1, 1995, at 11.75% if secured by a second lien and 12% if unsecured.
The holders of Senior Subordinated Notes would exchange their Notes ($566
million) for 100% of the common equity of the restructured Company. The
proposed plan contemplates a five-year revolving credit facility of at least
$148 million and a seven-year term loan facility of at least $57 million all on
terms to be finalized with the Company's lending banks.
The Company spokesperson stated that the informal committees
have advised the Company that holders of approximately 50% of the outstanding
Senior Secured Notes and approximately 52% of the outstanding Senior
Subordinated Notes support the restructuring.
The spokesperson also released EBITDA information which had
previously been made available to lenders under a confidentiality agreement.
The Company anticipates that EBITDA for the current fiscal year ending March 31,
1995, will be approximately $150 million and for the twelve month period
following confirmation of the restructuring proposal will be approximately $160
million. With respect to anticipated EBITDA for the current fiscal year, EBITDA
may be further reduced by additional declines in promotional allowances and
other vendor support which had formerly been, but is not currently, available to
the Company. With respect to anticipated EBITDA for both the current fiscal
year and for the 12 months following confirmation
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of the restructuring proposal, no allowance has been made for non-recurring
income or expense such as that resulting from store closings, employee
separation costs, lease cancellations or items of income or expense arising from
or attributable to the restructuring process. The spokesperson explained that
for purposes of this estimate EBITDA includes earnings before interest, taxes,
depreciation, amortization and unusual items.
The Company and the creditor groups have agreed to implement
the restructuring through the filing of a pre-negotiated plan of reorganization,
which the Company expects to have consummated within 90 to 120 days. The
Company emphasized, in that connection, that it will request the Court to order
payment in full of vendors and to approve debtor-in-possession financing in the
amount of $150 million which has been arranged so that the Company's vendors,
who have been supportive of its efforts throughout, will be paid currently in
the ordinary course on normal trade terms.
Gary D. Hirsch, Chairman of The Grand Union Company, stated
that: "These agreements represent an important milestone for the Company.
Since November 29, 1994, when the Company announced the need to pursue a debt
restructuring, representatives of The Grand Union Company's creditors have
consistently acted in a constructive manner to achieve an appropriate long-term
result for the Company."
Mr. Hirsch continued "The agreements reached with our public
debt holders and our bank lending group provide the Company with a framework to
move forward in a positive environment. When these agreements are implemented,
the Company will have significantly reduced its debt and interest expense
burdens. The new capital structure will permit the Company to serve its
customers and communities at the highest level and to pursue its capital
investment program."
The Company currently operates 236 retail food stores in six
Northeastern states.
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EXHIBIT B
TERMS OF PROPOSED RESTRUCTURING OF
THE GRAND UNION COMPANY
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The following sets forth the terms of the financial restructuring for the debt
of The Grand Union Company (the "Company") as agreed to by the informal
committee of holders of Senior Secured Notes (the "Senior Committee") and the
informal committee of holders of Senior Subordinated Notes (the "Subordinated
Committee") (collectively, the "Committee") and the Company.
I. TREATMENT OF EXISTING BANK DEBT (REVOLVER AND TERM LOAN)
Existing lenders will roll their existing commitments and
outstanding loans into the new credit facilities.
NEW REVOLVING CREDIT FACILITY
Amount: At least $148 million.
Ranking: Secured.
Security: A first lien on substantially all
assets of the Company.
Rate and Fees: Market.
Maturity: 5-year bullet.
Covenants: Standard.
NEW TERM LOAN
Amount: At least $57 million.
Ranking: Secured.
Security: A first lien on substantially all
assets of the Company.
Rate and Fees: Market.
Maturity: 7 years.
Amortization: No amortization for 5 years.
Covenants: Standard.
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II. TREATMENT OF EXISTING SENIOR SECURED NOTES
The existing senior secured notes to be exchanged for New
Senior Notes as described below:
Principal: $525 million plus an amount equal
to the accrued interest on the
existing Senior Secured Notes
through September 1, 1995.
Coupon: If the New Senior Notes are
secured, the coupon shall be 11.75%
per annum; if the New Senior Notes
are unsecured, the coupon shall be
12% per annum. In either case,
interest shall accrue on the New
Senior Notes from the earlier of
(i) consummation of the
reorganization or (ii) September 1,
1995; payable semi-annually
commencing on March 1, 1996.
Security, If A second lien on substantially
Applicable: all assets of the Company which
lien shall be subordinate, on terms
satisfactory to the Banks, to the
liens securing the Company's new
credit facilities. The second lien
shall be automatically released
upon the repayment of (i) $100
million in face amount of principal
from the proceeds of an equity
issue or (ii) $125 million in face
amount of principal from the
proceeds of additional bank
financing, or some pro-rata
combination thereof; PROVIDED,
HOWEVER, that such repayment must
be made at the following premiums:
Year 1 103%
Year 2-3 106%
Maturity: 9 years.
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Original
Redemption: Non-callable for 5 years and
callable in years 6, 7 and 8 at the
following call premiums:
Year 6 104%
Year 7 102%
Year 8 100%
Equity Call: Up to 1/3 principal amount of New
Senior Notes callable in years 1-3
from the proceeds of equity
issuance at the following call
premiums:
Year 1 103%
Year 2 106%
Year 3 106%
Covenants: Standard.
Other: Advisory fees for financial
advisors to be paid by the Company
to be agreed upon by the Committees
and the Company, subject to Court
approval.
III. TREATMENT OF SENIOR SUBORDINATED NOTES (2 tranches of 12.25%
Senior Subordinated Notes and 13% Senior Subordinated Notes)
The existing Senior Subordinated Notes shall be canceled and
holders of such Notes shall receive, pro rata, 100% of the common
stock of reorganized Grand Union Company.
IV. TREATMENT OF GENERAL UNSECURED CLAIMS
Payment in full of all general unsecured claims, including
trade, landlord, utility, indemnity and employee benefit claims.
With respect to the Company's trade suppliers who agree to
continue "normalized" credit terms during the Chapter 11, the
Company, with the full support of
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the Committees, shall seek to obtain necessary authorization to
continue to pay the pre-petition claims of these suppliers in the
ordinary course.
V. TREATMENT OF EXISTING EQUITY SECURITIES
OF THE GRAND UNION COMPANY
The restructuring will not provide for any distribution to
the holder of the capital stock of the Company.
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