SYRACUSE, N.Y. -- Penn Traffic Co. here said last week it is considering filing Chapter 11 bankruptcy if it can secure appropriate debtor-in-possession financing -- its second bankruptcy in four years if it decides to file.

The company said it is negotiating a DIP financing arrangement that would enable it to fund continuing operations. It also said it is "considering all strategic alternatives," including Chapter 11, and even if it is able to secure the DIP financing, the company said it might choose not to file.

Penn Traffic did not specify what other strategic alternatives it is considering.

The company said it plans to delay indefinitely the filing of its annual 10-K report for the fiscal year ended Feb. 1, following expiration of an extension on May 17. Through the first three quarters ended Nov. 2, Penn Traffic sales were down 1.9% to $1.75 billion, same-store sales were off 1%, and the company had a loss of $2.5 million.

Industry sources projected sales for the year ended Feb. 1 to slip approximately 4% to $2.3 billion.

Penn Traffic operates 212 supermarkets, including 70 P&C Foods in upstate New York, Vermont and New Hampshire, plus three in northern Pennsylvania, which account for approximately 45% of the company's total sales; 67 Big Bear Stores in Ohio and West Virginia, which account for approximately 40% of sales; and 42 corporate Bi-Lo Foods in eastern and western Pennsylvania and 33 Quality Foods in

northwest Pennsylvania, which combine to account for approximately 15% of sales.

It also operates a wholesale food-distribution business that serves 80 licensed franchises -- operating under the Riverside and Bi-Lo banners in Pennsylvania and the Big M banner in New York -- and 62 independent operations.

Penn Traffic emerged from a pre-negotiated Chapter 11 restructuring in June 1999 that enabled it to reduce its debt by two-thirds. Some analysts told SN at the time that they were skeptical of the company's ability to survive long term, although one observer noted that, with more than 200 stores, Penn Traffic would control a hefty volume, "and it will be awhile before anyone can 'competition' it out of existence."

Mark Jampole, Penn Traffic's spokesman, declined to pinpoint what issues prompted the chain to consider a restructuring.

At the outset of the third quarter last September, Penn Traffic said it planned to invest in promotional pricing to hold onto its market share while making greater use of loyalty card data to do more targeted marketing. Those activities, combined with the company's ongoing capital investments in its store base, "should position the company to increase sales when the economy recovers," Joseph V. Fisher, president and chief executive officer, said at the time.

However, at the end of the quarter three months later, Fisher said the chain had over-invested in promotional spending in certain markets and planned to retrench by moderating spending in some markets and maintaining a more aggressive level in others; however, he did not indicate which markets would see reductions and which would see increases.

Since emerging from bankruptcy four years ago, the company's sales have remained relatively flat -- in the $2.4 billion to $2.5 billion range -- with same-store sales rising 1% and 0.8% and successive net losses in the past two years for which the chain reported results.