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Fairway Signals It’s Likely to File for Bankruptcy

Fairway Market On BroadwayFairway Market On Broadway
View of produce outside the Fairway market.Photo by Oliver Morris — Getty Images

Grocery chain operator Fairway Group (FWM) has reached a tentative deal with creditors to restructure its debt in bankruptcy, Bloomberg reported, citing people familiar with the matter.

The deal is likely to put the company into Chapter 11 proceedings by the end of May, the report said.

Shares of the company, which operates about 15 stores in the New York City area, were down 5% at 38 cents on Friday.

Lenders, led by Blackstone Group (BX) credit arm GSO Capital Partners, would provide the company with a loan enabling it to continue operations while still in court, the report said.

Specific terms of the deal, including the size of the financing and whether store lease contracts for underperforming stores will be kept, are still under discussion, Bloomberg cited one of the people as saying.

As part of the deal, Fairway would focus on turning around the business without having to close a majority of its stores, Bloomberg reported.

The company has hired turnaround management firm Alvarez & Marsal Inc and investment bank Greenhill & Co as advisers for the restructuring, the report said.

Blackstone and Greenhill declined to comment. Fairway and Alvarez & Marsal did not respond to requests for comments.

Fairway, which has lost money in every quarter since it went public in 2013, said in February it needed to raise more capital to stay in business over the long term.

Fairway had said a failure to raise capital may prompt its auditor to issue a “going concern” warning, which would constitute an event of default under a senior credit facility where it had $266.8 million outstanding as of Dec. 27.