A&P in Bankruptcy Filing

A&P in Bankruptcy Filing

A&P, the troubled grocer, filed for Chapter 11 bankruptcy protection Sunday, weighed down by a crushing debt load and competition from low-price rivals.

The Montvale, N.J.-based grocery-store chain—formally called the Great Atlantic & Pacific Tea Co.—listed total debts of more than $3.2 billion and assets of about $2.5 billion in a petition filed in bankruptcy court in White Plains, N.Y.

The grocery chain secured $800 million in so-called debtor-in-possession financing from J.P. Morgan Chase & Co. to keep it afloat during bankruptcy proceedings.

A&P has been bleeding red ink and most recently posted a $153.7 million loss for the quarter ended Sept. 11. The chain has been through four chief executives in a little more than a year.

Aside from its namesake A&P chain, the company owns Waldbaum’s, Food Emporium, Super Fresh, Food Basics and Pathmark.

A person familiar with the situation said A&P’s inability to negotiate concessions from its main supplier, C&S Wholesale Grocers Inc., contributed to the chain’s decision to seek bankruptcy protection.

A&P also had about $13 million in interest payments due to unsecured creditors Wednesday, the person said, and wanted to preserve that money rather than pay it to those that would be lower down in the payment pecking order during bankruptcy proceedings.

C&S didn’t immediately respond to a request for comment.

In a statement, A&P Chief Executive Sam Martin said: “We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring. While we have made substantial progress on the operational and merchandising aspects of our turnaround plan, we concluded that we could not complete our turnaround without availing ourselves of Chapter 11.”

Jake Brace, a onetime executive at United Airlines’ parent, will lead the reorganization effort as A&P’s chief restructuring officer, the company said.

A&P had been closing and selling stores and looking for financing to keep it afloat. But the restructuring efforts intensified in recent weeks. The grocer tapped law firm Kirkland & Ellis LLP and investment bank Lazard Ltd. to advise on its reorganization.

Unlike many companies during the current economic slump, A&P doesn’t have a prearranged deal with creditors to restructure its debts. That means the company will have to develop a reorganization plan in bankruptcy court and solicit consent from creditors, a process that can last months or longer.

The filing caps a long fall for A&P, a prominent company that started as a New York tea and spice shop in the 1800s and grew to become the U.S.’s first national supermarket chain with 16,000 stores by the 1930s. The company’s name telegraphed its national ambitions.

Today, A&P owns just about 395 stores on the East Coast.

Supermarket magnate Ron Burkle infused A&P with $115 million last year in exchange for a 27.6% ownership stake and two board seats in addition to one he already had.

But that wasn’t enough to save the grocer, which has been squeezed by rivals chains like Stop & Shop and Shoprite as well as Wal-Mart Stores Inc. as consumers looked for deals amid the recession.

Grocers that solidified reputations as low-priced alternatives have seen sales grow recently, while those like A&P that have kept prices higher suffered declines.

Wall St Journal

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