Penn Traffic: PBGC objects to proposed second amended Chapter 11 plan

By Lisa Kerner

Charlotte, N.C., Oct. 26 - The Pension Benefit Guaranty Corp. filed an objection to Penn Traffic Co.'s second amended consolidated Chapter 11 plan, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The plan "cannot be confirmed because it includes, in effect, a discharge to which the debtors are not entitled and improperly releases non-debtor third parties from liability," the filing said.

In addition, the plan "improperly provides for substantive consolidation of debtors' estates, and disparate treatment of members of a class and fails to provide the full value of priority claims by failing to pay interest on disputed claims."

A hearing is set for Oct. 27.

The plan confirmation hearing is also set for Oct. 27.

Penn Traffic's disclosure statement was approved in September.

As previously reported in June when Penn Traffic filed its disclosure statement and plan, the company has consummated the sale of substantially all of its assets, and the plan implements the distribution of the remaining sale proceeds.

Under the plan:

• Secured claims are expected to be paid in full either in cash, through the abandonment of the property securing the claim or through reinstatement of the claim;

• Holders of general unsecured claims will receive their share of the unsecured creditor distribution for an estimated 6% to 17% recovery;

• Holders of convenience claims will recover 10% in cash; and

• Equity interests will be cancelled, and holders of equity interests will receive no distribution under the plan.

Penn Traffic, a Syracuse, N.Y.-based company involved in retail and wholesale food distribution, filed for bankruptcy on Nov. 18, 2009. The Chapter 11 case number is 09-14078.

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