Supermarkets General Corp., owner of the Pathmark grocery and drugstore chain, said Wednesday it plans to revise a previously announced recapitalization that included $675 million of new bank loans.

Led by Bankers Trust Co., the bank deal was contingent on the company's completing an initial public offering of stock as part of the proposed recapitalization.

But in a statement, Supermarkets General said it pulled the offering because it received a poor market reception.

Effect of Strike

The company cited the impact of a labor strike on its second-quarter results as a reason for the cancellation.

Supermarket deals in general have fallen out of favor in the new-issue market because flat to lower food prices are hurting industry sales, according to analysts at Standard & Poor's Corp.

Supermarkets General said it is considering alternative recapitalization plans that would include many of the previous plan's elements, except for the stock offering.

Anthony Cuti, Supermarket General's chief financial officer, could not be reached for comment on how the revised plans would affect the bank financing. Without the infusion of new equity from a stock offering, the company may have to bump up the pricing on the bank loans again. The credit was first repriced in May.

That's what happened to Ralph's Supermarkets Inc. last July, when it canceled a planned stock offering.

Ralph's proceeded with the other elements of its recapitalization, including a new bank credit. But it had to pay a higher interest rate on the loans. Bankers Trust was also the agent bank for Ralph's.

Fear of Excess Debt

Even when the initial public offering was in the picture, some banks refused to participate in the Supermarkets General deal because they thought the recapitalization would still leave the company with too much debt.

Bankers Trust initially priced the Supermarkets General credit at 225 basis points over the London interbank offered rate, which was widely considered inadequate when the deal was first launched this spring.

Pricing was increased in May, and a special tranche was created to attract yield-hungry loan funds. The loan was then fully subscribed, but Bankers Trust. was left with more of its original underwriting commitment than it wanted.

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