WAYNE, N.J. -- Grand Union Co. here last week received a temporary reprieve from lenders that will enable the chain to move ahead with formulation of a debt restructuring plan.
tores in six Northeastern states, has previously said that by Jan. 15 it intends to propose a restructuring plan, and the reprieve from lenders was a prerequisite. Gary D. Hirsch, chairman of Grand Union Holdings Corp., the chain's indirect parent company, said earlier this month that the restructuring became necessary because cash from operations after committed capital expenditures "will not be sufficient to fund cash interest payments due in early calendar 1995." The developments last week included the following:
The chain has received an interim waiver from its lending banks that it will not be considered in default on its credit agreement if it does not make Jan. 15 interest payments on its bonds.
The company said it does not expect to make the interest payments on the senior and senior subordinated notes.
The banks have also agreed to waive compliance with certain covenants in the bank credit agreement, which will enable Grand Union to continue to borrow money under its revolving line of credit through Feb. 14.
Hirsch said, "As we had expected, our bank lenders have demonstrated support for our restructuring process." Hirsch said the continued effectiveness of the banks' limited waiver and agreement is conditioned on the expectation that there are no materially negative changes in trade terms extended to Grand Union by its vendors.
Ken Bann, a high-yield securities analyst with Lehman Bros., New York, said the long-term outlook for Grand Union is positive, and the chain should emerge "with much less debt and a greater ability to put money into their stores and stop the sales losses."