Fresh & Easy files Chapter 11

Fresh & Easy files for Chapter 11 bankruptcy protection

On Oct. 30, Fresh & Easy, the U.S.-based grocery chain launched by UK supermarket giant Tesco PLC in 2007, announced that it had filed for Chapter 11 bankruptcy protection. According to a Reuters report, Fresh & Easy plans on winding down operations for all of its stores as it looks to sell off its remaining assets.

Fresh & Easy falls into debt

In its bankruptcy documents, the Fresh & Easy cited a lack of personalized products for each neighborhood store, limited inventory for popular items and rising prices for Fresh & Easy’s own brand of products. My Valley News reported that Fresh & Easy’s unique packaging system for fruits and vegetables prevented customers from inspecting its products, which led to a substantial drop in produce sales.

The company also stated that expanded food offerings from retail giants like Wal-Mart and Target as well as increasing competition among e-commerce grocery outlets contributed to rapidly declining revenues since 2014. Further, a lack of steam in the fresh format grocery sector with only a 1.3 percent dollar share, left the company unable to compete with traditional supermarkets and big box retail stores.

While the company made progress in the last year by re-allocating capital to fewer stores with a higher level of convenience and inventory, their losses left them insolvent. In a Supermarket News report, Fresh & Easy listed assets between $10 million to $50 million, but debts ranging from $100 million to $500 million. It has a list of over 30 top-ranking unsecured creditors including Harvest Meat Company Inc. for over $1 million, Hidden Villa Ranch for $909,000 and Pak West Paper and Packaging for more than $481,000.

Fresh & Easy’s second Chapter 11 filing in as many years

Fresh & Easy’s decision to seek Chapter 11 bankruptcy protection marks the second time in consecutive years it has done so, according to the Orange County Register. The company filed its previous bankruptcy petition in 2014, just one year after Tesco PLC sold Fresh & Easy to investment firm Yucaipa Cos. As part of the deal, Yucaipa provided more than $120 million in financing to Fresh & Easy under a restructuring plan that re-focused the store locations on convenience, fresh foods and ready-made meal products. However, the chain quickly became insolvent, which prompted Yucaipa to close 69 locations in 2014.

Prior to the bankruptcy filing, the company closed 97 of its remaining 167 stores and began substantial product markdowns, according to a CSPNet.com report. Further, the company’s website has been shut down except for a link to a statement from its executive directors on where to file claims in the bankruptcy settlement.

The reorganization plan

Fresh & Easy plans to liquidate all of its assets, with expected store closings and sales. As part of the reorganization plan, the court has approved an agreement reached between the company and Hilco Merchant Resources to purchase Fresh & Easy’s remaining inventory.

In its bankruptcy documents, the company also stated its desire is to emerge from the bankruptcy period as a viable business with a fresh influx of capital.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.