Bashas' Delays Financing

CHANDLER, Ariz. Bashas' said last week it believes it is starting to see the light at the end of the tunnel of its year-long bankruptcy, though high interest rates in the capital markets are threatening to keep that light at a distance. Edward Basha 3rd, senior vice president, told employees that a pending deal to secure new financing should enable the company to emerge from Chapter 11 bankruptcy

CHANDLER, Ariz. — Bashas' said last week it believes it is “starting to see the light at the end of the tunnel” of its year-long bankruptcy, though high interest rates in the capital markets are threatening to keep that light at a distance.

Edward Basha 3rd, senior vice president, told employees that a pending deal to secure new financing should enable the company to emerge from Chapter 11 bankruptcy protection “no later than August.”

The timing of any deal, however, could be dependent on whether Bashas' can obtain financing on the loans it is trying to negotiate at better interest rates than are currently available, Michael McGrath, the chain's bankruptcy attorney, told SN.

Bashas' is working with two different investment bankers to secure financing that would allow it to emerge from the bankruptcy it filed a year ago, he said, “and we had hoped we could complete the process by May or June.

“But given the volatility of the capital markets, we thought it would be more prudent to wait till July or later to see if the market improves.”

At Bashas' suggestion, the bankruptcy court has scheduled a confirmation hearing for July 22, McGrath added, “and the judge encouraged us to continue to pursue the takeout financing option.”

The judge also encouraged Bashas' to continue working with its lender groups to come to an agreement, McGrath said. “At this point, all of Bashas' secured and unsecured lenders are delighted with the takeout option. It's now just a matter of pricing the deal at the right rate once the capital markets stabilize, and Bashas' is willing to wait.”

Bashas' filed for Chapter 11 bankruptcy protection in June 2009 and filed a reorganization plan with the bankruptcy court in January — a plan that had the backing of chain management and the official committee of unsecured creditors but not the secured creditors. The court declined to confirm the plan without support from all parties.

The company said last month it was negotiating with two investment banking firms, which it did not name, who were interesting in arrangement new financing that would enable the chain to fully repay its lenders immediately in cash in the full amounts owed and allow the company to pay its unsecured creditors at a faster rate than previously anticipated.