PENN TRAFFIC REACHES PACT ON FINANCIAL RESTRUCTURING

SYRACUSE, N.Y. -- Penn Traffic Co. here said last week it has reached an agreement in principle on a financial restructuring that it expects to implement through a prenegotiated Chapter 11. ion of senior and subordinated notes and replacing them with new common stock, notes and warrants.The company did not indicate a time frame for filing Chapter 11, noting that the agreement in principle is subject

SYRACUSE, N.Y. -- Penn Traffic Co. here said last week it has reached an agreement in principle on a financial restructuring that it expects to implement through a prenegotiated Chapter 11.

ion of senior and subordinated notes and replacing them with new common stock, notes and warrants.

The company did not indicate a time frame for filing Chapter 11, noting that the agreement in principle is subject to several conditions, including definitive documentation and consummation of a Chapter 11 plan.

According to Gary D. Hirsch, chairman and chief executive officer, "Penn Traffic is very pleased it was able to reach a mutually beneficial agreement with its noteholders and intends to expeditiously implement the restructuring.

"Attaining this milestone on such a rapid timetable demonstrates the commitment of all involved in achieving a restructuring promptly and efficiently."

Under the agreement, noteholders who hold more than 50% of the company's senior notes and more than 50% of its subordinated notes committed themselves to supporting the restructuring plan.

Jeffrey Werbalowsky, of Houlihan, Lokey, Howard & Zukin Capital, financial adviser to the informal committee, said noteholders are satisfied that the restructuring "provides the company with financial flexibility needed to compete successfully in the foreseeable future."

Penn Traffic said it intends to provide full payment of all obligations as they come due to trade creditors that continue to support the company with customary trade credit and terms; The company said it will rely on a debtor-in-possession credit facility from Fleet Bank for $300 million.

The company said the facility will have initial undrawn availability in excess of $100 million at the time the Chapter 11 process commences.

Under terms of the preliminary agreement, holders of existing senior notes will receive $100 million in new senior notes and 19 million shares of new common stock. Holders of existing senior subordinated notes will receive one million shares of the new common stock and six-year warrants to purchase an additional one million shares of new stock with an exercise price of $18.30 per share.

In addition, the company said the restructuring contemplates that each 100 shares of Penn Traffic common stock outstanding immediately prior to the restructuring will be converted into one share of new common stock, totalling approximately 105,000 shares.