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Fairway Reaches Agreement With Secured Lenders to Eliminate Debt

May 03, 2016, 07:54 AM
Filed Under: Bankruptcy

Fairway Group Holdings, the parent company of Fairway Market, the iconic New York food retailer, announced that the company has reached an agreement with its senior secured lenders holding more than 70% of the company's senior secured debt on the terms of a reorganization that will eliminate approximately $140 million of senior secured debt and provide financing to restructure the company's balance sheet.

To implement the agreed upon restructuring, Fairway Group Holdings Corp and certain of its subsidiaries ("Fairway") have filed a Joint Prepackaged Chapter 11 Plan of Reorganization ("Prepackaged Plan") and filed voluntary petitions for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.  The company intends to use the Chapter 11 process to facilitate a financial restructuring designed to restore Fairway to long-term financial health while continuing to operate in the normal course of business without interruption.

In accordance with the Prepackaged Plan, holders of general unsecured claims, including suppliers, employees, unions and all other trade creditors will  receive payment in full on account of existing obligations in the ordinary course of business.  Further, the five collective bargaining agreements between Fairway and each of the unions will be assumed under the Prepackaged Plan and remain in full force and effect.  All of the Company's outstanding shares of common stock will be cancelled pursuant to the Prepackaged Plan with no distribution to holders thereof.

As a part of the Prepackaged Plan, the company entered into an agreement with certain holders of the Company's senior secured loans.  Supporting lenders agreed to vote in favor of the company's Prepackaged Plan and exchange their loans for common equity and $84 million of debt of the reorganized company.  All other prepetition creditors will not be impaired and will be paid in in the ordinary course.  Successful implementation of the proposed plan would result in a substantial conversion into equity of the company's $279 million of senior secured loans.

In conjunction with its filing, the company is seeking approval to enter into a $55 million superpriority secured debtor-in-possession ("DIP") credit facility and a $30.6 million letter of credit facility to cover outstanding letters of credit, which will be provided by certain of the company's existing senior secured lenders. The proposed DIP financing will help support Fairway's reorganization plans and enable normal post-petition operation of its business, including timely payment of employee wages, benefits and other obligations on an uninterrupted basis.  In addition, the Company has also secured a commitment from its current lenders to convert the amounts extended under the DIP loan to an exit loan.  The company has also filed a number of customary first day motions with the Bankruptcy Court to support ongoing operations.

"We believe that implementing this Prepackaged Plan is the best opportunity for Fairway to restructure its balance sheet on an expedited basis, strengthen its operations, retain jobs and create long-term value, while continuing to provide customers with the best food experience in the greater New York area," said Jack Murphy, Chief Executive Officer.

Vendors and other stakeholders can obtain additional information about the reorganization by visiting  During the Chapter 11 process, the Company expects to pay for purchases of goods and services in the ordinary course of business. Fairway's legal advisor is Weil, Gotshal & Manges LLP.  Dennis Stogsdill of Alvarez & Marsal North America LLC, has been appointed Chief Restructuring Officer for the Company during the chapter 11 cases.   Norton Rose Fulbright US LLP is special corporate counsel to Fairway.

The Company's senior secured lenders are being advised by King & Spalding LLP, as legal counsel, and Moelis & Company LLC as financial advisor.

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