Efforts by Arizona grocer Bashas' Inc. to quickly secure new financing so it can exit bankruptcy protection have taken a hit from the global credit markets.
Lawyers briefing the bankruptcy judge overseeing the company's reorganization said Friday that the quick financing deal they anticipated just two weeks ago will take longer than expected.
The company still hopes to emerge from bankruptcy by the end of July, Bashas' lawyer Michael McGrath told the judge. But the company might need an interim deal with its key lenders while it awaits the new loan.
"We are hopeful, but there are issues on whether that (loan) is available in July," McGrath told Judge James Marlar. "Even if the financing is not available in July we'd still like to get an approved plan" to exit bankruptcy, he said.
Just two weeks ago, McGrath painted a rosy picture of the company's chances of getting a loan of more than $200 million to pay off the banks and insurance companies holding the firm's debt and notes. Negotiations on terms of repayment to the lenders had been holding up a planned reorganization approved by most other creditors, so a new loan would remove that roadblock.
But as suddenly as the so-called takeout financing appeared, what was described Friday as "turbulence" in the credit markets made it less likely the deal could be done quickly.
"We don't think it is a question of if the exit financing will close," said Craig D. Hansen, a lawyer representing Bashas' in its effort to secure the financing. "We think it is a matter of when and the pricing."
Markets have been hammered in recent weeks because of worries about debt in Europe, particularly Greece, and the U.S. stock market has seen a big sell-off that continued Friday.
Another glitch raised by one of the dozen or so lawyers in Friday's hearing was a demand by insurance companies holding $86 million in long-term notes. They want several million dollars in interest they would have earned and an $18 million penalty payment.
Bashas' attorneys said they planned to object to that request.
A clearly frustrated Marlar said if the sides don't agree to a deal, he would enforce one after a trial.
"The parties come in one day and they're holding hands, and the next day they're not," he said. "If this is capable of a consensual resolution, do it. Otherwise, try it."
Bashas' unsecured creditors, mainly suppliers, would be paid back over time, and most have agreed.
The family owned company, based in Chandler, filed for a planned Chapter 11 bankruptcy reorganization in July 2009 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.
It has since closed 31 of its more than 155 stores, cut about 1,000 workers and renegotiated store leases to slash costs.
Besides Bashas' stores, the company operates Food City, which caters to Hispanic shoppers, and high-end grocer AJ's Fine Foods. Nearly all of the stores are in Arizona.