8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 30, 2009

THE PENN TRAFFIC COMPANY

(Exact Name of Registrant as Specified in its Charter)

Delaware (State or Other Jurisdiction of Incorporation) 0-8858 (Commission File Number) 25-0716800 (IRS Employer Identification No.)

1200 State Fair Boulevard

Syracuse, New York 13221-4737

(Address of Principal Executive Offices) (Zip Code)

(315) 453-7284

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.  Entry into a Material Definitive Agreement.

The Company is a party to that certain Credit Agreement, dated April 13, 2005 (as amended and to date, and including the “Credit Agreement”), by and among The Penn Traffic Company, Penny Curtiss Baking Company, Inc. and Big M Supermarkets, Inc., as borrowers (the “Borrowers”), the other credit parties signatory thereto, General Electric Capital Corporation (the “Agent”), as agent for the lenders, and the lenders signatory thereto from time to time.  A copy of the Credit Agreement is attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed on September 12, 2006, and all amendments to the initial Credit Agreement have been previously filed.

On October 30, 2009, the Agent notified the Company that because of alleged overstatements of the value of certain machinery and equipment in the Company’s borrowing base certificates (due to the Company’s alleged failure to timely deliver title documents for such machinery and equipment to the Agent as required under the Credit Agreement), events of default had occurred under the Credit Agreement (the “Specified Events of Default”).  The Agent advised the Company that as a result of the occurrence and continuance of the Specified Events of Default, neither Agent nor any lender has any obligation to make any further advances, issue any letters of credit for, or otherwise extend credit to the Borrowers.  The Agent also notified the Company that, pursuant to the Credit Agreement, it was requiring the Company to collateralize all the letter of credit obligations that lenders had previously incurred at the Borrower’s request, which as of November 3, 2009 were approximately $35.8 million, with cash or cash equivalents equal to 105% of the maximum amount then available to be drawn under such letters of credit.  The Agent reserved all its other rights, which include terminating the revolving portion of the facility, accelerating all other financial obligations of the Company, and charging the default rate under the Credit Agreement.

On November 3, 2009, the Borrowers entered into a forbearance agreement (the “Forbearance Agreement”) with the Agent and certain other credit parties and lenders (the “Lenders”).  Under the Forbearance Agreement, the Lenders agreed to forbear, until the earlier of: (i) November 25, 2009, (ii) any breach or default other than the Specified Events of Default under the Credit Agreement, or (iii) the taking of any action by the lenders under our separate real estate credit facility against the collateral under the Credit Agreement (the “Forbearance Period”), from exercising any of their rights or remedies under the Credit Agreement and related agreements arising solely out of the Specified Events of Default.  Under the Forbearance Agreement, the Lenders have agreed to make certain amounts of the cash collateral used to collateralize the Lenders’ letter of credit obligations available to the Borrowers during the Forbearance Period.  These funds will be made available to Borrowers for the purposes and in the approximate amounts specified in a budget required to be delivered by the Borrowers by November 9, 2009, in form and substance reasonably satisfactory to the Lenders, or prior to the Borrowers’ delivery of this budget, on a daily basis in the Agent’s discretion.  Pursuant to the Forbearance Agreement, the Company also appointed Ronald Stengel of Conway Del Genio Gries & Co., LLC (“CDG”) as the Chief Restructuring Officer of the Company.

On November 4, 2009 we issued a press release, a copy of which is attached hereto as Exhibit 99.1, announcing that the Company had entered into the Forbearance Agreement with the Agent and the Lenders, and that this was due to the delivery by the Agent of the October 30, 2009 notice of the Specified Events of Default.

Item 2.04.  Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off- Balance Sheet Arrangement.

Reference is made to the disclosures at Items 1.01 and 8.01 hereof.

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On November 3, 2009, the Company appointed Ronald Stengel as its Chief Restructuring Officer (“CRO”), reporting directly to the Board of Directors of the Company.  Mr. Stengel is 62 years old and is currently a Senior Managing Director at CDG, a position he has held since May, 2002.  Mr. Stengel oversees CDG’s Crisis Management practice and has been providing crisis management and turnaround consulting services to distressed companies for over 35 years.  He has previously served as interim Chief Executive Officer, interim Chief Operating Officer or interim Chief Restructuring Officer of many companies, including but not limited to, Adelphia Communications Corporation, Wolf Camera Corporation, American Pad and Paper Company, Reading China & Glass, Inc., Smith Corona Corporation, FlexTek Corporation, Towle Manufacturing, The Rytex Company, Town & Country Corporation, Global Home Products, GEO Specialty Chemicals, and Texscan Corporation.  Mr. Stengel has a BS in Mechanical Engineering and an MBA from the University of Pennsylvania.

On November 3, 2009 the Company also engaged CDG pursuant to an agreement (the “CDG Engagement Letter”) which provides that CDG will provide certain restructuring advisory services to the Company, including making Mr. Stengel available to serve as the CRO of the Company.  CDG has advised the Company that Mr. Stengel’s compensation for his service as a Senior Managing Director is unrelated to the amounts to be paid to CDG by the Company for CDG’s services, including Mr. Stengel’s service as the CRO of the Company, although it may be based in part upon CDG’s financial results during periods in which CDG provides services to the Company.

CDG has a long history of providing financial advisory services to the Company.  CDG was first engaged by the Company on October 4, 2006 and continued to assist the Company through December 2008.  Ben Jones, a Managing Director of CDG, served as the Company’s Interim Chief Financial Officer from January, 2007 through May, 2007.  CDG was re-engaged by the Company as its financial advisor on October 13, 2009.

Item 8.01.  Other Events.

The Agent’s conclusion that events of default have occurred under the Credit Agreement, and requiring the Company to collateralize the Lenders’ letter of credit obligations, may result in the Company’s lenders and other creditors claiming it has defaulted, or the Company actually being in default under its agreements with them.  To the extent there are any such claimed or actual defaults, the Company will seek waivers of these defaults, and the Company believes it would be in the best interests of all its creditors for such waivers to be granted.  There can be no assurance that any such defaults will be cured within applicable cure periods, if any, or that any waivers or other relief will be obtained, in which case such defaults may result in the acceleration of certain of the Company’s financial obligations, which the Company may not be in a position to satisfy.

Item 9.01 Financial Statements and Exhibits.

Exhibit No. Exhibit

99.1 Press Release, dated November 4, 2009

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THE PENN TRAFFIC COMPANY (Registrant)
	By:	/s/ Daniel J. Mahoney
		Name:	Daniel J. Mahoney
		Title:	SVP, General Counsel

Date: November 4, 2009

EX-99.1

PENN TRAFFIC ENTERS AGREEMENT TO MAINTAIN LETTERS OF CREDIT AND OTHER EXTENSIONS OF CREDIT

SYRACUSE, N.Y. – The Penn Traffic Company (Pink Sheets: PTFC), entered into a forbearance agreement with all of its senior working capital lenders and General Electric Capital Corporation ("GE Capital"), as agent for the lenders, on November 3, 2009.

“We continue to work closely with our lenders and appreciate the flexibility that they have provided us with this latest agreement,” said President and Chief Executive Officer Gregory J. Young.

The company currently expects that, under the terms of the forbearance agreement, the participating lenders will continue to provide letters of credit and other forms of credit to the company through at least November 25, 2009.  This forbearance agreement was necessitated by GE Capital’s notification on October 30, 2009 that Penn Traffic was in technical default of certain provisions of its current credit agreements.

In connection with the forbearance agreement, Penn Traffic’s board of directors has retained Ronald F. Stengel, senior managing director with the firm of Conway Del Genio Gries & Co., LLC, as Penn Traffic’s chief restructuring officer, effective immediately.  His firm has worked with Penn Traffic on a variety of matters, including extensive financial advisory services from 2006 through 2008.

Penn Traffic’s procurement partner for most categories represented in the company’s retail stores, C&S Wholesale Grocers Inc., has been notified of these developments and is expected to continue providing its services to Penn Traffic without interruption.

About Penn Traffic

The Penn Traffic Company owns and operates supermarkets under the P&C, Quality and BiLo trade names in Upstate New York, Pennsylvania, Vermont and New Hampshire.  Headquartered in Syracuse, N.Y., Penn Traffic’s conventional supermarkets offer value pricing, fresh and local products, and full-service stores in convenient neighborhood locations.  The regional retailer’s P&C Fresh supermarkets combine all the features of conventional-format stores with gourmet, premium and store-made fresh products, as well as ready-to-eat foods, easy-to prepare meals and expanded natural and organic product offerings.  Retail supermarkets and consumers became Penn Traffic’s primary focus with the sale of its wholesale business segment during fiscal 2009.  More information on the company may be found at www.penntraffic.com.

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Forward Looking Statements

This press release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, reflecting management’s current analysis and expectations, based on what management believes to be reasonable assumptions. These forward-looking statements include statements relating to our anticipated financial performance and business prospects. Statements preceded by, followed by or that include words such as “believe”, “anticipate”, “estimate”, “expect”, “could”, “may”, and other similar expressions are to be considered such forward-looking statements. Forward-looking statements may involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from those projected, stated or implied, depending on such factors as: risk factors set forth in the company’s annual report on Form 10-K for the fiscal year ended January 31, 2009; general economic and business conditions; economic and competitive uncertainties; the ability of the company to improve its operating performance and effectuate its business plans; the ability of the company to operate pursuant to the terms of its credit facilities and to comply with the terms of its lending agreements or to amend or modify the terms of such agreements as may be needed from time to time; the ability of the company to generate cash; the ability of the company to attract and maintain adequate capital; the ability of the company to refinance our indebtedness; increases in prevailing interest rates; the ability of the company to obtain trade credit, and shipments and terms with vendors and service providers for current orders; the ability of the company to maintain contracts that are critical to its operations; potential adverse developments with respect to the company’s liquidity or results of operations; competition, including increased capital investment and promotional activity by the company’s competitors; availability, location and terms of sites for store development; the successful implementation of the company’s capital expenditure program; labor relations; labor and employee benefit costs including increases in health care and pension costs and the level of contributions to the company sponsored pension plans; the result of the pursuit of strategic alternatives; the ability of the company to pursue strategic alternatives; changes in strategies; changes in generally accepted accounting principles; adverse changes in economic and political climates around the world, including terrorist activities and international hostilities; and the outcome of pending, or the commencement of any new, legal proceedings against, or governmental investigations of the company.  The company cautions that the foregoing list of important factors is not exhaustive. Accordingly, there can be no assurance that the company will meet future results, performance or achievements expressed or implied by such forward-looking statements, which are not generally required to be publicly revised as circumstances change, and which the company does not intend to update.

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FOR PENN TRAFFIC:

Jeffrey Schoenborn of Travers Collins & Company Investor Relations, 716-464-4732, jschoenborn@traverscollins.com.

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