%1

Great Atlantic & Pacific Tea Co. is considering a bankruptcy filing among possible options as the 156-year-old grocer works to cut costs, Bloomberg News reported yesterday. A filing, which would be the chain’s second in five years, could come as soon as next month. Bids for A&P were due last month as part of an auction for the company, but no viable offers for the entire chain were received, meaning that the stores could be sold piecemeal, marking the end of what was once the largest U.S. grocer. The company said in March that it was reviewing strategic alternatives for the business, and that process continues, according to Hugh Burns, a spokesman for Montvale, New Jersey-based A&P at Sard Verbinnen & Co.

Great Atlantic & Pacific Tea Co. is considering a bankruptcy filing among possible options as the 156-year-old grocer works to cut costs, Bloomberg News reported yesterday. A filing, which would be the chain’s second in five years, could come as soon as next month. Bids for A&P were due last month as part of an auction for the company, but no viable offers for the entire chain were received, meaning that the stores could be sold piecemeal, marking the end of what was once the largest U.S. grocer. The company said in March that it was reviewing strategic alternatives for the business, and that process continues, according to Hugh Burns, a spokesman for Montvale, New Jersey-based A&P at Sard Verbinnen & Co.

Cengage Learning Acquisitions has abandoned its effort to lower the rate on a $2 billion loan that it got last year to support its exit from bankruptcy as investors show signs of fatigue, Bloomberg News reported yesterday. The educational company had been seeking to cut its interest rate by as much as 1.5 percentage point amid a jump in refinancings that have reduced payments to investors. The loan declined yesterday to 99.938 cents on the dollar, down a cent from this year’s high in April, after the decision on Tuesday to scrap the repricing attempt, according to quotes compiled by Bloomberg. Borrowers have sought to lower rates on more than $63 billion of leveraged loans this year, squeezing yield from lenders as they take advantage of the drop in new deals in the market. Investors last week pulled $223 million from U.S. funds that buy leveraged loans, the most since the period through April 1, according Lipper.

Hercules Offshore Inc. plans to put itself into bankruptcy next month in a creditor-supported deal that would wipe out all of its $1.2 billion of debt, Bloomberg News reported yesterday. The offshore drilling rig owner grappling with a cash crunch after oil prices plunged entered into a pact with more than 67 percent of its junior-ranked bondholders that would transfer the company’s ownership to them in exchange for canceling its borrowings, according to a regulatory filing yesterday. The restructuring support agreement requires Houston-based Hercules to file for bankruptcy by July 8. Investors of six sets of unsecured and convertible notes would trade their holdings for 96.9 percent of new common stock in a reorganized Hercules, according to the filing. The company’s existing equity holders would see their stake reduced to 3.1 percent. The company plans to issue $450 million of new borrowings when it emerges from bankruptcy to fund the remaining cost of constructing a new drilling rig, the filing shows.

U.S. Trustee Judy Robbins has filed an objection to the proposed bidding procedures for Patriot Coal, including the stalking-horse bid from Blackhawk Mining, saying they would “likely chill the bidding process,” Forbes.com reported yesterday. Robbins objected to the deal’s breakup fee and potential expense reimbursements for Blackhawk that could reach as high as $24 million, as well as the level of discretion and “unfettered ability” the procedures provide to the company to determine who would constitute a “qualified bidder,” determine what information to provide bidders, and alter the bidding procedures as they see fit, “all without any real oversight or consultation except for, in limited circumstances, in consultation with the DIP lenders.” With respect to the bid protections, Robbins said that they should be denied by the bankruptcy court because the amount is excessive; the bidding process contemplates Blackhawk being permitted to credit bid the amount of the protections in an overbid, thus creating an unleveled playing field for competing bids; and the protections are triggered by termination events other than an alternative transaction, such as a failure to close the transaction by the Sept. 25 milestone deadline. A hearing on the sale procedures is scheduled for June 23.

After a prolonged battle for patients in the midcoast area, Parkview Adventist Medical Center has filed for bankruptcy and intends to merge with its former rival, Mid Coast Health Services of Brunswick, Maine, the Portland (Maine) Press Herald reported today. Parkview said yesterday that its chapter 11 filing includes a plan to merge with Mid Coast. The two hospitals for years have vied for leadership in the Brunswick, Bath and Topsham, Maine region, and in its filing, Parkview suggested that Mid Coast has been winning more patients. Under the proposal, inpatient and emergency services will be consolidated at the Mid Coast campus. Read more. 

For further analysis of hospital bankruptcies and health care insolvency, be sure to pick up a copy of the ABI Health Care Insolvency Manual, Third Edition. 

Health Diagnostic Laboratory Inc. has proposed to spend a $30 million loan from private-equity giant Cerberus Capital Management LP to keep the Virginia lab operating while leaders figure out a survival plan, Dow Jones Daily Bankruptcy Review reported today. Health Diagnostic Laboratory officials said that the Richmond lab, which tests for cardiovascular diseases like diabetes, is low on cash after business slowed and a bank froze the company's account last month, making it tough for the firm to pay suppliers. Health Diagnostic Laboratory filed for bankruptcy on June 7, several months after agreeing to pay nearly $50 million to settle civil allegations filed by the U.S. Department of Justice that it paid doctors to send the company patient blood samples. Justice Department officials said the fees were illegal kickbacks; the lab has denied wrongdoing.

Bondholders of gun maker Colt ripped into the bankrupt company's private equity owner in a court hearing yesterday, saying that the firm sped up its decline by starving it of cash and investment, Reuters reported yesterday. A Colt lawyer also told a U.S. bankruptcy judge that the gun maker may ditch its plan to sell itself to its current owner, Sciens Management, and wipe out $250 million of bond debt. Colt had planned to use the hearing to seek approval to borrow $20 million from its current lenders. John Rapisardi, an attorney with O'Melveny & Myers, which is representing Colt, said the company needed cash to make payroll.

Caesars Entertainment Corp. faces a new attack in its effort to cut billions in debt, this time from a trustee for bondholders whose support the casino giant needs to restructure its bankrupt operating unit, Bloomberg News reported yesterday. UMB Bank, a trustee for senior bondholders owed more than $6 billion, sued Caesars Monday in Manhattan federal court, echoing allegations that until now had been mostly pushed by a less-influential group of lower-ranking creditors. Caesars has tried for months to line up enough senior creditors to win approval of a proposal to cut lower-ranking debt, allow the parent to retain a stake in the operating unit and halt related lawsuits against its private-equity owners, Apollo Global Management and TPG Capital.

U.S. gun maker Colt filed for bankruptcy protection on Sunday and has put itself up for sale in an unusual auction with an opening proposal from its current owner, Reuters reported yesterday. An affiliate of private equity firm Sciens Capital Management has proposed buying Colt Defense by assuming obligations including up to $105 million in outstanding loans and as much as $20 million in new loans, court documents filed on Monday show. The stalking-horse bid does not involve any cash and sheds $250 million in bonds. In other words, Colt would look much like it does now, only without the bonds.