Ted Simons: Good evening and welcome to "Horizon." I'm Ted Simons. The turnout for last month's primary election was higher than expected. The secretary of state's office had predicted a turnout of 20% to 25%, based on information provided by county recorders. Instead, the turnout was 30%, and that was the highest for a primary election since 1990. Despite resistance from some lenders, Bashas' has emerged from bankruptcy and in doing so, the Chandler-based grocer has plans to repay 100% of its debt, something not often seen in bankruptcy reorganization plans. Here to talk about those plans and the future of the local grocery chain is Trey Basha, vice president of retail operations for the Bashas' family of stores. Thanks for joining us.
Trey Basha: Good to be with you this evening.
Ted Simons: 13 months, reorganization in 13 months. Seems kind of quick.
Trey Basha: It seemed long to us. But our attorney said it was a fairly quick process and our judge was a judge who liked to move cases through the courts.
Ted Simons: So is Bashas' completely back and out of the woods?
Trey Basha: Bashas' is back. We've emerged from Chapter 11. We're in a tough economy and in a very competitive market.
Ted Simons: We mentioned in the intro that it includes repayment, 100% of debt to creditors. Somewhat unusual, it’s usually not 100%. How was that worked out?
Trey Basha: Our lifeblood is the vendor community that supplies us with products. We owed the money and wanted to pay them back and wanted to reestablish those good relationships.
Ted Simons: I understand there was an annual payment and things got moved around to monthly. How does that work?
Trey Basha: That's with the lender group. What the plan called for initially was we would make interest payments monthly. And then we would make principle payments on an annual basis. We've worked out an arrangement with our lender group where now we pay principle and interest monthly.
Ted Simons: With a lump sum at the end of -- what? -- three years.
Trey Basha: Of approximately $155 million at the end of three years.
Ted Simons: I was reading that some weren't entirely sure you could make that lump sum or get the money going in three year. How do you respond?
Trey Basha: We believe with the reorganization and substantial payment of debt we'll be able to refinance that amount at the end of three years.
Ted Simons: The cost-cutting programs you've put in place helped to be part of this reorganization plan. Talk to us about that. What was cut and how much?
Trey Basha: Without question, we took approximately $57 million out of administration and looked at every aspect of the company. We started first with salaries. Executives took a 15% cut in pay and graduated that down. Looked at medical benefits and all things that are ancillary to the business and removed those and again, the annual savings is approximately $57 million.
Ted Simons: How difficult were those cuts?
Trey Basha: When we come to people, the cuts were difficult. There were people reassigned or lost jobs and that's always very difficult.
Ted Simons: How did Bashas's get into this situation in the first place? What happened?
Trey Basha: We grew with Arizona and we expanded and frankly over-expanded and then we were taken aback by several issues. One was the economic downturn and the battle with the ASCW and others. And ultimately, found ourselves in a spot where we were running out of time and money and frankly had no choice but to file for Chapter 11 protection.
Ted Simons: A CPA involved in the bankruptcy procedure described the company as, quote, dysfunctional and bloated and with few cost controls. Was that is that an accurate assessment?
Trey Basha: I think based upon where we are today, yes, that was an accurate assessment. Going into it, we didn't see it that way, but we functioned well with those cost cut, so I think that's accurate.
Ted Simons: You mentioned the economy and also mentioned the unions. Take those one by one. The economy, how much was a hit, low sales, how much did that hit you?
Trey Basha: Quite a bit. Arizona depends upon construction and construction fell of the map. And we hit -- had planned stores two, three years out and those homes weren't coming and neither was the population and jobs were lost in the construction industry and people left the state and that affected us greatly.
Ted Simons: Talk more about the situation with the unions.
Trey Basha: Part of what I will say is we had an ongoing dispute with the unions. They initiated a corporate campaign against us and we filed an action against them. After filing for Chapter 11, though, the parties came together and we have reached a settlement that at the request of the union was filed confidentially with the courts.
Ted Simons: Was this something that could have been achieved before reorganization or only have happened after?
Trey Basha: I really don't know. That's difficult to answer. It was a ongoing dispute and possibly would have been settled in the courts but it would have been years before it took effect.
Ted Simons: Throughout all of this, before, during and even after, was there much thought among management, family, whatever, this is it. Let's get out of this. We've had enough. We've had our run. We’ve had the good times -- the good times seem to be gone. Let's get out of the business.
Trey Basha: As a family, we're committed to the state and to our employees. We call them members. We're committed to them as well. So, no, I don't think there was ever a thought we would walk away and not pay for bills. Our entire desire was to pay everybody back 100% and save as many jobs along the way.
Ted Simons: And you're confident you're going to get this done, balloon payment, and I hear that the Phoenix market is the most competitive market for grocery stores in the country. First, is that true, and secondly, why?
Trey Basha: Arizona is one of the most competitive markets in the country, specifically the Phoenix metro area. We have great growth here and people attribute most of it that to. But it's easy zoning, flat land, suburban in nature and so plenty of opportunities for newcomers to come in.
Ted Simons: So basically, it's not just the growth, it's it the growth with the help of zoning and other factors?
Trey Basha: Exactly.
Ted Simons: For those watching and saying, hmm, what is different now? How would someone, a shopper, a customer go into a Bashas' store now and say, this has changed. It looks and feels different. Or do they feel that?
Trey Basha: Hopefully, our customers will feel we've stepped up our customer service. We've been working diligently on pricing. And we're more committed than ever to the state and to our customer base.
Ted Simons: Talk about the customer base a little bit more. How important was that loyal base during the troubled times?
Trey Basha: I think that's what got us through the troubled times. We have loyal customers and we had a group, friends of Bashas' that was formed and took out ads in the newspaper in favor of us, so we're grateful to our customer base.
Ted Simons: Very good. Thank you for joining us.
Trey Basha: My pleasure. Good to be with you.