Fairway Group Holdings Corp., parent company of Fairway Markets, a New York City food retailer, has reached an agreement with its lenders on the terms of a reorganization that will eliminate approximately $140 million of debt and provide financing to restructure the company’s balance sheet.
The group filed a Joint Prepackaged Chapter 11 Plan of Reorganization in U.S. Bankruptcy Court on May 2. The company intends to use the Chapter 11 process to facilitate a financial restructuring designed to restore Fairway to long-term financial health.
The company expects no interruptions to customer service throughout the process. Consumers can continue to purchase Fairway’s products at one of its 15 stores or four Wine and Spirits stores; Manhattan residents can still shop online. During the Chapter 11 process, the company expects to pay for purchases of goods and services in the ordinary course of business.
In accordance with the prepackaged 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 in the course of business. Further, the five collective bargaining agreements between Fairway and each of the unions will be assumed under the prepackaged plan and remain in full force and effect.
In conjunction with its filing, the company is seeking approval to enter into a $55 million 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.
“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, Fairway CEO.
Fairway started as a fresh fruit and vegetable stand at the corner of 74th & Broadway in New York City.
