Financial Troubles & Bankruptcy Court
In the late 1990s, Penn Traffic experienced a significant reduction in its profitability because of several merchandising and operational changes that had a negative impact on its business. By late 1998, the company realized that while it had strong consumer franchises, it was working under an untenable debt burden. To address this challenge, in early 1999 Penn Traffic negotiated an agreement with bondholders to restructure more than $1.1 billion in bond debt.
Penn Traffic completed its financial restructuring in June 1999 with more than 75% of its debt retired. In 2003 the company filed for bankruptcy again, this time resulting in the loss of Big Bear, one of their largest and most important grocery chains. The move came as a surprise to many, since most people perceived Big Bear as Penn Traffic's "crown jewel" and the chain was more profitable compared to its P&C Stores family members.
In 2007, two former Penn Traffic executives were indicted on fraud charges.
In early 2008, Penn Traffic closed its private bakery, Penny Curtiss. The bakery provided bread products for its own stores as well as to other supermarket chains. Penn Traffic cited the loss of the local Aldi stores contract in August 2007 as the primary reason for the bakery's closing. The company also said the bakery was contributing less than 4 percent of Penn Traffic's total annual revenue. In December 2008 The Penn Traffic Company entered into a definitive agreement to sell its wholesale business segment to C&S Wholesale Grocers Inc.
On November 18, 2009, Penn Traffic filed for Chapter 11 Bankruptcy protection after second-quarter losses of $7 million (the highest loss ever for the company), missed loan payments, and slower shipments from suppliers. Originally, the company intended to sell all of its assets by the end of 2009 and close on the deal or deals by the early January 2010.
As of January 9, 2010 Penn Traffic is entertaining 3 separate bids: $54 million from Price Chopper for 22 P&C Foods stores, a private bid of $36.5 million from a team of professional liquidators for all of P&C's assets and $85 million from Tops Markets for all of Penn Traffic's stores.
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