Penn Traffic cancels auction, but employees seek more time to bid

By Caroline Salls

Pittsburgh, Jan. 19 - Penn Traffic Co. has cancelled the auction for its global asset sale after receiving no qualified competing bids, other than the stalking horse bid submitted by Tops Markets, LLC, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

However, a group of five Penn Traffic employees told the court Tuesday that they have decided to form an Employee Stock Ownership Plan to buy the company out of bankruptcy.

The employee group said it has just located funding, and it asked the court to give it seven days to complete the bid process. The bidding deadline was noon ET on Tuesday.

According to a letter to the court, the employees would be backed by Ray Divakar of India. A separate letter from Jessup & Lamont Securities Corp. said Jessup holds $25.5 billion of bonds owned by Divakar. The bonds are fully backed by the U.S. Treasury.

The sale hearing is currently scheduled for Jan. 25.

As previously reported, Topps has offered to pay $85 million for the Penn Traffic assets.

Penn Traffic, a Syracuse, N.Y.-based company involved in retail and wholesale food distribution, filed for bankruptcy on Nov. 18 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 09-14078.

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