Strategy

A&P Files Chapter 11 to Facilitate Store Sales

Struggling grocer has received "stalking horse" bids for 120 stores but no bidder has been willing to assume its liabilities.
Katie Kuehner-HebertJuly 20, 2015
A&P Files Chapter 11 to Facilitate Store Sales

Squeezed between discounters and higher-end stores, struggling grocer A&P on Monday has filed bankruptcy for the second time in five years so it can sell at least 120 of its stores.

The Montvale, N.J. company said in court papers filed Sunday that it had received “stalking horse” bids totaling almost $600 million for 120 stores but no bidder has been willing to assume its liabilities — in particular, substantial labor and
pension obligations — in connection with an acquisition.

As a result, A&P said, the company had concluded that “the
best and only viable path to maximize the value of their business and preserve thousands of jobs is a strategic Chapter 11 filing to facilitate sales free and clear of liabilities.”

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According to court papers, Acme Markets, Stop & Shop Supermarket Co. and Key Food Stores Co-operative Inc. are proposed as lead bidders for the stores. The offers will be tested at a bankruptcy auction.

As part of the bankruptcy process, A&P will also close 25 stores “due to lack of interest and significant ongoing store operating losses.”

“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,” A&P president and chief executive Paul Hertz said in a news release

“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,” A&P Chief Executive Paul Hertz said in a news release.

The company currently operates 296 stores under the brand names A&P, Best Cellars, Food Basics, The Food Emporium, Pathmark, Superfresh, and Waldbaum’s. The sale process could include a possible credit bid for certain assets to be purchased by A&P’s current investors.

A&P also said that it was seeking court approval to enter into a $100 million debtor-in-possession financing agreement with Fortress Investment Group, which would enable A&P to continue operating its stores, pay its suppliers, vendors, employees and others.

The company re-emerged after its first 2010 Chapter 11 filing two years later as a private entity, with financing from investors including Goldman Sachs and an affiliate of billionaire Ron Burkle.

However, the grocer “has been unable to stand up to behemoths such as Wal-Mart and Costco who entice customers with big discounts,” Reuters reports. “At the same time, wealthier shoppers have been lured away by higher-end stores such as Whole Foods.”