A&P's bankruptcy repeat
July 20, 2015
by Erica Shaffer
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A&P has filed bankruptcy for the second time in five years.
MONTVALE, NJ – The Great Atlantic & Pacific Tea Company, Inc. (A&P) filed a petition under Chapter 11 of the US Bankruptcy Code with the US Bankruptcy Court for the Southern District of New York. Store closings and a potential sell off of some brick-and-mortar locations are on the table for what is the chain’s second bankruptcy in five years.
The company has debts of approximately $1.2 billion, according to court papers. As of Feb. 28, A&P reported assets of approximately $1.6 billion and liabilities of approximately $2.3 billion. A&P owes more than $39 million to its largest supplier, C&S Wholesale Grocers Inc. in Keene, NH. Other creditors include Atlanta-based Coca-Cola Enterprises, which is owed more than $4 million and Mondelez Global LLC in East Hanover, NJ, which is owed more than $3 million.
Michael Nowlan, senior managing director of corporate finance/restructuring group at FTI Consulting Inc. which is A&P’s financial advisor, said in court documents that as news of A&P’s financial problems began to spread some of its suppliers and vendors negotiated a reduction in trade terms while others demanded up-front cash payments as a condition for further deliveries.
“The actions taken by these vendors have diminished the Debtors’ cash position by approximately $24 million” in the weeks before the bankruptcy filing, Nowlan said. “During the first four weeks immediately post-filing, the Debtors available books cash balance is forecasted to be as low as $23 million.”
The company has bidders for at least 120 stores it wants to sell for approximately $600 million.
The company said in a news release that it will close 25 stores due to lack of interest and ongoing store operating losses. A&P also is seeking court approval to enter into a $100 million debtor-in-possession (DIP) financing agreement with Fortress Investment Group. The company said that, if approved, the DIP financing will enable A&P to continue operating stores, pay its suppliers and vendors, and make payroll for employees.
“After careful consideration of all alternatives, we have concluded that a sale process implemented through chapter 11 is the best way for A&P to preserve as many jobs as possible, and maximize value for all stakeholders,” Paul Hertz, president and CEO, said in a statement. “The interest from other strategic operators has been robust during the company’s sales process to date, and we have every expectation that will continue in chapter 11. And while the decision to close some stores is always difficult, these actions will enable the company to refocus its efforts to ensure the vast majority of A&P stores continue operating under new owners as a result of the court-supervised process. We greatly appreciate the continued support of our customers, suppliers and employees, who have maintained an unwavering commitment to our business and our customers.”
The United Food and Commercial Workers (UFCW) International Union released a statement telling A&P the union expects the company to “do what is right by members and their families.” UFCW said 30,000 of its members work for A&P.
“Looking ahead, we fully expect A&P to stay in business during this bankruptcy process and honor its responsibilities to its employees, our members, and their families,” the UFCW said in its statement. “The UFCW and UFCW Local Unions will work hard to ensure that the process for selling stores protects our members’ jobs, working conditions, and benefits. We will also hold A&P to its commitments to involve UFCW in the sales process, protect union contracts and these good jobs.”
A&P is one of the United States’ first supermarket chains. Founded in 1859, A&P currently operates 296 stores under the A&P, Best Cellars, Food Basics, The Food Emporium, Pathmark, Superfresh and Waldbaum’s brands.