FOR IMMEDIATE RELEASE NEWS
Contact: Thomas C. Franco
Rohit J. Menezes
(212) 229-2222
HOMELAND STORES ANNOUNCES FINAL DETAILS OF
RESTRUCTURING PLAN
- COMPANY TO CONDUCT BUSINESS AS USUAL THROUGHOUT PROCESS
- $27 MILLION IN WORKING CAPITAL FINANCING ARRANGED
- CEO SAYS HOMELAND TO MAINTAIN MARKET LEADERSHIP
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OKLAHOMA CITY, OK, May 13, 1996 - Homeland Stores, Inc., a
private company, announced today that it will begin
implementing its previously announced financial
restructuring plan. As previously reported, the proposed
restructuring is supported by Homeland's bank group, a
committee representing approximately 80% of Homeland's
outstanding senior secured bonds, and Homeland's labor
unions. The restructuring is expected to reduce Homeland's
debt service obligations and labor costs, which will greatly
strengthen its financial position and permit the company to
maintain its market leadership. Homeland expects to
complete the restructuring by mid-summer 1996.
An integral part of Homeland's restructuring is its
previously announced pact with its labor unions to modify
certain elements of Homeland's collective bargaining
agreements. These modifications, which were overwhelmingly
ratified by the union members in March, will provide for,
among other things, wage and benefit modifications, the
buyout of certain employees, and the issuance and purchase
of new equity to a trust acting on behalf of the unionized
employees. The modified collective bargaining agreements
are conditioned on, and will become effective upon, the
consummation of the restructuring.
-more -
The restructuring will be implemented by means of a
"pre-arranged" Chapter 11 plan of reorganization, which was
submitted today to the United States Bankruptcy Court,
District of Delaware, together with a disclosure statement
describing the plan. In order to facilitate the
restructuring process, Homeland has entered into a debtor-in-
possession lending facility with its existing bank group,
providing Homeland with up to $27 million of working capital
financing. This facility has been approved on an interim
basis by the court, with a final approval hearing scheduled
for May 31, 1996. Homeland believes that this facility will
provide it with the financing necessary to maintain its
normal business operations during the restructuring period,
including the payment of the post-petition claims of
employees and trade vendors.
Homeland said that the financial restructuring will
have no impact on the company's normal store operating hours
or its in-store promotions, such as double coupons.
Homeland said that as part of a long-term effort to
rationalize its store network, it plans to close one store
at 1520 North Lewis Street in Tulsa, OK and one store at
5800 Bell Street in Amarillo, TX. The approximately 50
affected employees will have employment opportunities in
Homeland stores within their respective areas. Going
forward, the company expects to operate a total of 65 stores
and employ approximately 4,250 people.
Pursuant to the restructuring, the $95 million of
Homeland's senior secured bonds currently outstanding (plus
accrued interest) will be canceled, and the bondholders will
receive (in the aggregate) $60 million face amount of new
senior subordinated notes and $1.5 million in cash. The new
senior subordinated notes will mature in 2003, bear interest
semi-annually at a rate of 10% per annum, and will not be
secured. In addition, the bondholders and the company's
general unsecured creditors will receive approximately 60%
and 35%, respectively, of the equity of the reorganized
Homeland (assuming total unsecured claims of approximately
$63 million, including bondholder unsecured claims).
Homeland's existing equity holders will receive the
remaining 5% of the new equity together with 5-year warrants
to purchase an additional 5% of such equity.
- more -
"For fifty years we have been providing customers in
this area with superior levels of service and quality
products at goods prices, and we plan to be here for at
least another fifty doing this and more for our customers,"
said James A. Demme, Homeland's Chief Executive Officer.
"This agreement permits us to continue business as usual,
which is good news for our customers, our employees, our
creditors and other suppliers."
P. Eric Siegert, Senior Vice President of Houlihan,
Lokey, Howard & Zukin, the firm advising Homeland's
bondholders, said, "We believe that Homeland's financial
restructuring plan is sound and will put the company back on
solid footing. The bondholder committee unanimously
supports this plan of reorganization."
Mike DeFabis, President and Chief Executive Officer of
Associated Wholesale Grocers, one of the largest food
wholesalers in the U.S., which supplies 70% of Homeland's
requirements, said, "We strongly support Homeland, and the
long-term supply agreement we have with the company reflects
our confidence that it will remain the leader in the
communities it serves."
"These final steps represent a new beginning for
Homeland and will allow us to maintain both our recent
momentum and our long-standing market leadership," Mr. Demme
added. "We are gratified by the strong support that all
involved have given the restructuring plan. The cooperative
spirit demonstrated by employees, creditors, and suppliers
shows a genuine interest in the future success of Homeland."
Homeland is the leading supermarket chain in Oklahoma,
southern Kansas, and the Texas panhandle region.
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