Penn Traffic: board seat had been offered to Bay Harbour, investor has not signed confidentially agreement

By Lisa Kerner

Charlotte, N.C., May 7 - The Penn Traffic Co. said that contrary to Bay Harbour Management's disclosure on Friday, Penn Traffic has offered a board seat to a designee of Bay Harbour.

Bay Harbour Management, LC, Bay Harbour Master Ltd. and Trophy Hunter Investments, Ltd. said they were unable to reach a mutually satisfactory confidentiality agreement regarding access to non-public information about Penn Traffic to address financing alternatives. In addition, the investors suggested that the company increase the number of directors and elect a designee of the reporting persons to fill the vacancy, however, Penn Traffic refused to take such action on terms satisfactory to the investors, according to a schedule 13D filing with the Securities and Exchange Commission.

Bay Harbour and the other investors plan to continue seeking board representation.

Penn Traffic, in an April 23 letter from board chairman Bob Kelly to Bay Harbour Management, "expressly invited a representative of Bay Harbour to serve on the board of directors" of the company and requested that the investor enter into a customary confidentiality agreement, which Bay Harbour has so far declined to do.

Because of Bay Harbour's 23.1% ownership of Penn Traffic's outstanding stock, the company "believes that providing Bay Harbour with access to the company's confidential information, without restricting the actions that Bay Harbour may take once it receives such information, would not be in the best interest of all of Penn Traffic's stockholders," according to a company news release.

Kelly asserts that the Penn Traffic board has been "very active and responsive to its shareholders as evidence by the hiring of a new chief executive officer, replacing of the chief financial officer and hiring other senior managers.

Penn Traffic is a Syracuse, N.Y.-based company involved in retail and wholesale food distribution.

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