-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OMqB0+LPzJKuLVh4HOK1sUYjtCrMjtkEvqTzUYhHN17o0K0YBmSVRCagQ+hav/pP qa5gmMbnJLlrhkGK2fTH/Q== 0001012975-06-000373.txt : 20060824 0001012975-06-000373.hdr.sgml : 20060824 20060823184512 ACCESSION NUMBER: 0001012975-06-000373 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20060824 DATE AS OF CHANGE: 20060823 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PENN TRAFFIC CO CENTRAL INDEX KEY: 0000077155 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 250716800 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-20957 FILM NUMBER: 061051759 BUSINESS ADDRESS: STREET 1: 1200 STATE FAIR BLVD CITY: SRYACUSE STATE: NY ZIP: 13221-4737 BUSINESS PHONE: 8145369900 MAIL ADDRESS: STREET 1: 1200 STATE FAIR BLVD CITY: SYRACUSE STATE: NY ZIP: 13221-4737 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BAY HARBOUR MANAGEMENT LC CENTRAL INDEX KEY: 0001049310 IRS NUMBER: 593418243 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 777 SOUTH HARBOUR ISLAND BLVD CITY: TAMPA STATE: FL ZIP: 33602 BUSINESS PHONE: 8132721992 MAIL ADDRESS: STREET 1: 777 SOUTH HARBOUR ISLAND BLVD CITY: TAMPA STATE: FL ZIP: 33602 SC 13D 1 e8700882v1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)* THE PENN TRAFFIC COMPANY ------------------------ (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 PER SHARE --------------------------------------- (Title of Class of Securities) 707832200 --------- (CUSIP Number) Bay Harbour Management, L.C. 885 Third Avenue, 34th Floor New York, New York 10022 (212)371-2211 -------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) AUGUST 23, 2006 --------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 707832200 1 Names of Reporting Persons. Bay Harbour Management, L.C. I.R.S. Identification Nos. of above persons (entities only) -------------------------------------------------------------------------- 2 Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) |X| - ---------------------------------------------------------------------------- 3 SEC Use Only - ---------------------------------------------------------------------------- 4 Source of Funds (See Instructions) OO - ---------------------------------------------------------------------------- 5 Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ] - ---------------------------------------------------------------------------- 6 Citizenship or Place of Organization Florida - ---------------------------------------------------------------------------- 7 Sole Voting Power ---------------------------------------------- 8 Shared Voting Power 300,535 Number of ---------------------------------------------- 9 Sole Dispositive Power Shares Bene- ---------------------------------------------- ficially Owned 10 Shared Dispositive Power 300,535 ---------------------------------------------- 11 Aggregate Amount Beneficially Owned by Each Reporting Person 300,535 - -------------------------------------------------------------------------- 12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ] - ---------------------------------------------------------------------------- 13 Percent of Class Represented by Amount in Row (11) 3.7% - ---------------------------------------------------------------------------- 14 Type of Reporting Person (See Instructions) IA - ---------------------------------------------------------------------------- 2 ITEM 1. SECURITY AND ISSUER This Schedule 13D relates to the Common Stock, par value $0.01 per share (the "COMMON STOCK") of The Penn Traffic Company, a Delaware corporation (the "ISSUER"). The address of the executive offices of the Issuer is 1200 State Fair Boulevard, Syracuse, New York, 13221-4737. ITEM 2. IDENTITY AND BACKGROUND (a-f) This Schedule 13D is being filed by Bay Harbour Management L.C. (the "REPORTING PERSON"). The Reporting Person is a Florida limited liability company and a registered investment adviser under the Investment Advisers Act of 1940, as amended, with a business address of 885 Third Avenue, New York, NY 10022. During the past five years, the Reporting Person has never been: (i) convicted in any criminal proceeding, or (ii) a party to any civil proceeding commenced before a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is now subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The source of funds used by the Reporting Person to purchase the Common Stock were the following investment accounts managed on a discretionary basis by the Reporting Person: Trophy Hunter Investments Ltd. and certain other managed accounts. (collectively, the "FUNDS"). ITEM 4. PURPOSE OF TRANSACTION The Reporting Person has purchased and holds the Common Stock reported by it for investment for the Funds and it has either shared or sole investment power and voting power with respect to the Common Stock reported by it. The Reporting Person acquired the Common Stock because it considered the Common Stock to be an attractive investment opportunity. The Reporting Persons may cause the Funds, or other investment entities which it advises or manages, to make further acquisitions of Common Stock from time to time or to dispose of any or all of the shares of Common Stock held by the Funds or other investment entities at any time. On August 23, 2006, the Reporting Person wrote a letter to Robert Chapman, the President and Chief Executive Officer of the Issuer, expressing concern about several matters related to the corporate governance of the Issuer, including (i) the lack of a shareholder meeting since the Issuer emerged from Chapter 11 bankruptcy on April 13, 2005; (ii) the lack of publicly-released financial statements of the Issuer since it emerged from Chapter 11 bankruptcy; (iii) the compensation arrangements of certain of the Issuer's executive officers and directors; and (iv) other matters relating to an ongoing internal investigation of the Issuer's promotional and allowance practices. A copy of this letter is attached hereto as Exhibit 1. The Reporting Person intends continuously to review its investment in the Issuer and may in the future change its present course of action. Depending upon a variety of factors, including, without limitation, responsiveness of the Issuer's management to the concerns of the Reporting Person, current and anticipated future trading prices of the Common Stock or other equity securities of the Issuer, the financial condition, results of operations and prospects of the Issuer and general economic, financial market and industry conditions, the Reporting Person may cause the sale of all or part of the Shares held by it, or may cause the purchase of additional Shares or other equity securities of the Issuer, in privately negotiated transactions, as part of a cash tender offer or exchange offer, or otherwise. Any such purchases or sales may be made at any time without prior notice. Depending upon the foregoing factors or other factors not listed herein, the Reporting Person may formulate other purposes, plans or proposals with respect to the Issuer, the Common Stock or other equity securities of the Issuer. 3 The foregoing is subject to change at any time, and there can be no assurance that the Reporting Person will take any of the actions set forth above. Except as otherwise described in this Item 4 and the letter attached hereto as Exhibit 1, the Reporting Person currently has no plan or proposal which relates to, or would result, in any of the events or transactions described in Item 4(a) through (j) of Schedule 13D, although the Reporting Person reserves the right to formulate such plans or proposals in the future. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) As of the date of this Schedule 13D, the Reporting Person beneficially owns 300,535 shares of Common Stock (the "SHARES"). The Reporting Person shares voting and dispositive power over such holdings with the Funds. As of August 23, 2006, the Shares represented 3.7% of the approximate total 8,072,572 shares of Common Stock outstanding as previously reported by the Issuer. None of the individual Funds owns a number of shares of Common Stock equal to or greater than 5% of such total Common Stock outstanding. (b) The Reporting Person and the Funds share voting and dispositive power over the 300,535 shares of Common Stock held directly by the Funds. (c) Neither the Reporting Person nor any of the Funds have engaged in any transactions regarding the Common Stock within the last sixty days. (d) Other than the Funds that directly hold the Shares, and except as set forth in this Item 5, no person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares. (e) The Reporting Person is not currently, nor has it ever been, the beneficial owner of more than five percent of the Common Stock. ITEM 6. CONTRACTS, AGREEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER By virtue of the relationships between the Reporting Person and the Funds, as described in Item 2, the Reporting Person and the Funds may be deemed to be a "group" under the Federal securities laws. Except as otherwise set forth in this Schedule 13D, the Reporting Person expressly disclaims beneficial ownership of any of the shares of Common Stock beneficially owned by any of the Funds and the filing of this Statement shall not be construed as an admission, for the purposes of Sections 13(d) and 13(g) or under any provision of the Exchange Act or the rules promulgated thereunder or for any other purpose, that the Reporting Person is a beneficial owner of any such shares. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 Letter of the Reporting Person to the President and Chief Executive Officer of the Issuer, dated August 23, 2006. 4 S I G N A T U R E After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete, and correct. Date: August 23, 2006 Bay Harbour Management, L.C. /S/ KURT CELLAR ------------------------------------------ Name: Kurt Cellar Title: Partner EX-1 2 epennltr.txt VIA FEDEX August 23, 2006 The Board of Directors The Penn Traffic Company 1200 State Fair Blvd. Syracuse, NY 13221 (315) 461-2393 Mr. Robert Chapman, President & CEO Mr. Robert Kelly, Chairman Mr. Randy Martin, CFO Mr. Kevin Collins, Director Mr. John Burke, Director Mr. Alan Levitan, Director Mr. Ben Evans, Director To the Board of Directors of The Penn Traffic Company: Bay Harbour Management, L.C. ("BHM") is the beneficial owner of 300,535 shares, or approximately 3.7% (assuming 8,072,572 shares outstanding), of the common stock of The Penn Traffic Company ("Penn Traffic" or the "Company"). We are writing you, and simultaneously making our letter public, in an effort to communicate our demands as one of the largest owners of the Company. While we would prefer to discuss these matters with you in a direct face-to-face conversation, your refusal to return our repeated calls has left us no alternative. For that reason, along with those enumerated below, you are in receipt of this letter. FACT #1: The Company emerged from bankruptcy over 16 months ago and has not held a shareholder meeting. DEMAND: BHM requests that you hold a shareholder meeting within 60 days. It is fundamentally unfair to shareholders, and violates Article 2.2 of the Company's By-Laws, that, although the Company emerged from Chapter 11 bankruptcy on April 13, 2005, no shareholder meeting has taken place since that time. BHM requests that the agenda at the shareholder meeting include (i) a presentation and discussion of recent financial results, (ii) a presentation and discussion of current business conditions and outlook, (iii) a detailed report on the status of the assessment of the financial impact of the improper practices discovered by the Audit Committee(1), and (iv) a detailed report on the status of the SEC investigation. FACT #2: The Company has not filed financial statements in over 18 months. DEMAND: The last time the Company filed a 10K was on May 3, 2002. The last time the Company filed a 10Q was on December 17, 2002. The last time financial statements of any kind were made public by the Company was a monthly operating report for the five weeks ending January 29, 2005, while the Company was still in Chapter 11. The Company's shareholders have not been allowed access to any kind of financial data for the past 18 months.(2) BHM demands that the Company immediately make public unaudited income statements and balance sheets for all quarterly fiscal periods since its emergence from Chapter 11 bankruptcy. FACT #3: The management team and the Board appear, based on the limited information available to investors, to be taking actions inconsistent with the best interests of the Company and its shareholders, such as the new compensation arrangements granted to Gregory Young, reflecting the fact that the management team and the Board do not have any material ownership stake in the Company. DEMAND: Management should provide a detailed explanation for the prima facie unreasonable compensation arrangement granted to Gregory Young. None of the Company's management and no members of the Board have any material equity stake in the Company. This misalignment between the interests of the shareholders and the management team and the Board was accentuated when the Company announced your decision to compensate Gregory Young, SVP - Chief Marketing Officer/Distribution, with a salary of $300,000, a signing bonus of $100,000, the eligibility to receive another bonus of 45%-90% of his salary, a $15,000 relocation bonus and various other benefits.(3) Altogether, Mr. Young will have the opportunity to reap almost $700,000 in his first year of re-employment with the Company.(4) This does not - --------------------- 1 As disclosed in Exhibit 99.1 to the June 1, 2006 8K filed by the Company. 2 We do not consider as financial data the sporadic updates on availability under the revolver, which are useless in a vacuum, and only come with the filing of the increasingly infuriating 8Ks where we learn that the Company is "further delaying the finalization and release of audited financials." 3 Exhibit 99.1 to the July 13, 2006 8K filed by the Company. 4 Mr. Young was previously employed by the Company from 1974 to 1999. include any additional bonus he may receive under a change of control scenario. This level of compensation is outrageous and demonstrates a careless use of shareholder funds, which neither the management team or the Board has any invested interest in protecting. FACT #4: On June 29, 2006, the Company entered into a consulting agreement with the Chairman of the Board, Robert Kelly. DEMAND: We do not understand why it was necessary or appropriate for the Company to engage Robert Kelly, the Chairman of the Board, as a consultant to the Company at an annualized rate of up to $480,000.(5) BHM demands that you provide a detailed description of the specific tasks Mr. Kelly has been engaged to perform, together with a detailed explanation as to why such tasks are necessary, how the compensation to Mr. Kelly was determined, and why the management team and Mr. Kelly were incapable of performing those same tasks without such additional compensation. FACT #5: CEO Robert Chapman and CFO Randy Martin have refused to return no less than 30 phone calls over the last two months from representatives of BHM. DEMAND: The refusal of the Company to provide its investors with even basic financial and operating information about the Company, as required by federal securities laws, and to avoid all other appropriate opportunities to communicate with and provide appropriate information to shareholders, is completely inappropriate and unacceptable. This information should be provided immediately, and an appropriate public opportunity should be provided for all shareholders to ask questions of management. The Company cannot and should not hide behind its prior accounting problems as an excuse to prevent current disclosure of current operating results that are not in any way affected by the old problems. FACT #6: Numerous examples exist of companies that continue to not only communicate with, but also provide financial updates to, their shareholder base while an accounting investigation is ongoing. KEY ENERGY SERVICES, INC. is in the process of restating its 2003 financial results after fraud was discovered in early 2004. The SEC is investigating the company. Still, the company makes public monthly income statement and balance sheet data and continues to communicate with shareholders. The - --------------------- 5 Exhibit 99.1 to the June 30, 2006 8K filed by the Company. Mr. Kelly has been engaged at a rate of $3,000 per day. The number of days during each three month period shall not exceed 40. Mr. Kelly's engagement is for a period of six months and shall be automatically extended for additional consecutive three month periods unless the agreement is terminated with 30 days prior written notice. company hosts quarterly conference calls, meets with investors and generally discloses whatever it can to help shareholders understand the company's situation and current financial performance. We suspect you are already aware of this situation. As you know, Kevin Collins, a Director of the Company, is also a Director of Key Energy Services, Inc. THERMADYNE HOLDINGS CORP. is in the process of restating its 2003, 2004 and 2005 financials after accounting issues were discovered relating to income taxes, foreign currency translation and the accounting of certain foreign business units. Still, the company releases unaudited quarterly financial statements, hosts quarterly conference calls and the management team makes itself accessible to shareholders. METROMEDIA INTERNATIONAL GROUP, INC. is in the process of restating its 2004 financial results. Still, the company intends to release preliminary financial results for 2005 ahead of the completion of the restatement. The company continues to communicate with shareholders. DEMAND: These are just a few examples of companies that both communicate with and deliver financial updates to shareholders while accounting investigations are ongoing. The Company's refusal to do either is made more egregious by the Company's own statements to the effect that the improper practices "had largely ceased by the time of the Company's Chapter 11 filing."(6) There is no reason why shareholders should be kept in the dark for over 18 months when the issues being investigated have no material impact on the Company's post-emergence financial results. By referencing the above examples, BHM demands that the Company take immediate and appropriate action to rectify the improper withholding of information described herein. FACT #7: Despite the passage of more than twelve months from the date the Company announced that the SEC had requested documents from the Company concerning promotional and allowance practices, at which time the Audit Committee announced its internal investigation into the same matters, the Company still has not been able to complete its investigation. DEMAND: We do not understand why it took eleven months, from July 1, 2005 to June 1, 2006, for the Audit Committee to confirm that the Company "had engaged in certain improper practices," and that "these improper practices affected the Company's prior reported financial results." We also do not understand why the Audit Committee requires yet more time to complete "an assessment of the financial statement impact" of the improper practices.(7) Management should provide a detailed explanation as to why the investigation has not been completed. - --------------------- 6 Exhibit 99.1 to the June 1, 2006 8K filed by the Company. 7 Exhibit 99.1 to the June 1, 2006 8K filed by the Company. We trust that you will immediately take note of the above facts, consult with your outside legal, accounting and other professional advisors, and take appropriate action to correct the improper withholding of information described above. We also request that your response simultaneously be made public so that it is available to all investors. Very truly yours, Kurt Cellar Partner cc: Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Attn: John W. White, Director, Division of Corporation Finance Linda C. Thomsen, Director, Division of Enforcement Mr. Robert Chapman Mr. Robert Kelly Mr. Alan Levitan President & CEO Chairman Director 1200 State Fair Blvd. 1200 State Fair Blvd. 25 Boxwood Dr. Syracuse, NY 13221 Syracuse, NY 13221 Morristown, NJ 07960 (315) 453-7284 (315) 461-2393 (973) 644-4996 Mr. Randy Martin, CFO Mr. Kevin Collins, Director Mr. John Burke, Director 1200 State Fair Blvd. 21 Old Hill Farms Rd. 22549 Malden St. Syracuse, NY 13221 Westport, CT 06880 West Hills, CA 91304 (315) 461-2423 (203) 227-5561 (818) 888-7065 Mr. Ben Evans, Director 95 Wake Robin Ln. Stamford, CT 06903 (203) 322-2552 -----END PRIVACY-ENHANCED MESSAGE-----