Court Approves A&P Plan; Martin Remains CEO

Court Approves A&P Plan; Martin Remains CEO

WHITE PLAINS, N.Y. — The U.S. Bankruptcy Court here last week approved A&P [3]'s Chapter 11 exit plan after the company — one of the nation’s oldest retailers — spent 14 months in bankruptcy shedding unprofitable stores and renegotiating labor contracts.

The reorganization plan includes $490 million in debt and equity financing from Yucaipa Cos., the Ron Burkle-led investment group that has a long history of investments in food retailing. A&P also renegotiated its labor contracts late last year to reduce its costs and to prepare to emerge from bankruptcy.

The confirmation hearing in the case had been delayed several times as the company finalized its exit financing, which reports said had been reduced to a $645 million package led by J.P. Morgan Chase & Co. and Credit Suisse Group AG, down from a previous plan that would have provided $750 million.

According to the reports, a $40 million fund to pay unsecured creditors will not be part of the reorganization plan, but those creditors could be repaid if the company is acquired within five years for a large enough sum.

A spokeswoman for A&P told SN the company was “taking the necessary steps to emerge from Chapter 11 as soon as possible.”

In addition, A&P said in court filings that Sam Martin has accepted an offer of $1.2 million annually to remain as the chief executive officer of A&P upon its emergence from bankruptcy.

Martin and most of his current senior executive team are set to remain in place as A&P exits Chapter 11 bankruptcy and continues as a private company with new owners. Martin will also receive a sign-on bonus of $720,000 and will also participate in a long-term incentive plan that could earn him a share of up to 7.5% of the equity in the new company.

The employment status of Jake Brace, the company’s current chief financial officer and its chief restructuring officer, remains subject to ongoing negotiations.

Current senior executives Thomas O’Boyle (chief merchandising officer), Paul Hertz (chief operating officer), Christopher McGarry (chief legal officer) and Carter Knox (chief human resources officer) have also been retained and are likewise eligible for the long-term and short-term incentives as Martin.

Martin will also serve as one of seven members of the board of directors.

In a separate filing, the United Food and Commercial Workers union designated Lou Giraurdo to A&P’s board. Giraurdo is a partner in a San Francisco law firm and a former food-company executive.

Owners Yucaipa Co., Mount Kellett Capital Management and Goldman Sachs will appoint five board members. Burkle will serve as chairman.