Grocery chain Bashas’ emergence from bankruptcy delayed by dispute with lenders

Bashas’ bankruptcy reorg delayed by lender glitch

PHOENIX — An agreement between Bashas’ Inc. and bondholders who are owed more than $215 million is holding up the Arizona grocery chain’s emergence from bankruptcy protection.

Lawyers for Bashas’, banks and bondholders and unsecured creditors told U.S. Bankruptcy Judge James M. Marlar on Wednesday that negotiations on terms of repayment to the lenders is the glitch holding up an agreement.

A plan that would allow the family-owned chain to leave bankruptcy has the support of most other creditors. Creditors committee attorney Jim Cross blamed the delay on a last minute deal between Bashas’ and the banks and insurance companies holding the bonds.

The lenders and insurance companies voted against a reorganization plan put together by a committee. Most other creditors agreed to its terms.

“We want to get this company out of bankruptcy as soon as possible,” Cross told the judge. “The lenders are the only thing standing in the way.”

Bashas’ attorney Michael McGrath said there are ongoing negotiations that could lead to a deal soon. Bank lawyer Bob Miller disputed Cross’ characterization, and said any deal would be made within two weeks.

The company filed for a planned Chapter 11 bankruptcy reorganization in June after being stung by the global credit crisis, slowing growth and the hyper-competitive Phoenix-area grocery market. Bashas’ said it had about $271 million in liabilities and $386 million in assets.

The company filed a reorganization plan in January that would allow the family to maintain equity and repay creditors over a period of years. It hoped to emerge from bankruptcy protection this month, but that has been pushed back at least until next month.

Marlar urged the parties to continue working toward a deal to settle the case without a trial, warning them that there will be increased risk if the case goes to trial. He set another hearing for next week to get a status update.

“Right now, I’m just a traffic cop,” Marlar told the attorneys. “But if it is presented to me to decide it, than that’s what I’ll do.”

Chandler, Ariz.-based Bashas’ closed 31 of its more than 155 stores, laid off about 1,000 workers and negotiated store leases to cut costs after filing for reorganization. Besides Bashas’ stores, the company operates Food City, which caters to Hispanic shoppers, and high-end grocer AJ’s Fine Foods. Nearly all are in Arizona.

On the Net:

www.bashas.com