Grocery Chain A&P Filed for Bankruptcy. Again.

Grocery Chain A&P Filed for Bankruptcy. Again.

The chain recently filed for Chapter 11 bankruptcy protection. According to Wall Street Journal, A&P has planned for a series of sales to competitors after it claimed total debts of $2.3 billion between 2010 and 2015.

A&P’s bankruptcy

A&P filed for bankruptcy before, as this Chapter 11 filing marks the second time in five years that A&P has sought bankruptcy protection. The company cited the recession and $1 billion in debt for filing Chapter 11 bankruptcy in 2010, but emerged from bankruptcy in 2012 as a privately-held corporation after closing several stores and securing additional financing.

However, for this Chapter 11 filing, A&P blamed competition, inflexible collective bargaining agreements with unions and legacy costs associated with high labor expenses and leases for unused stores for its financial struggles. The company also claimed that union contracts and pension obligations for a significant portion of its workforce created staggering debt that made it difficult to remain competitive.

The restructuring plan

A&P reported that it will seek to re-negotiate these collective bargaining agreements during bankruptcy proceedings after reporting significant drops in sales revenue. According to papers filed in U.S. Bankruptcy Court, the company reported $5.5 billion in sales with a $2 billion gross profit in 2014, but claimed a $305 million loss after taxes, operating costs, interest expenses and depreciation.

For this recent Chapter 11 filing, A&P listed over 100,000 creditors with more than $1 billion in debt, including several large, unsecured creditors. This list of unsecured creditors included $39.4 million to C&S Wholesale Grocers, $8.4 million to McKesson Drug Co., $6.7 million to Facility Source LLC, $4.8 million to Coca-Cola Enterprises, and $3.2 million to Mondelez Global LLC.

The future of A&P

According to USA Today, A&P has received $100 million in debtor-in-possession financing from Fortress Credit to maintain operations at most of its locations during bankruptcy proceedings. The company has also secured bidders for 120 of its 296 stores, with lead buyers including Acme Markets Inc., Stop & Shop Supermarket Co. and Key Food Stores Cooperative Inc. Total proceeds of the sales of the auction will be approximately $600 million.

The company noted that its financial future is uncertain due to increased competition at both high and low-priced ends of the grocery industry. Between lower-cost competition from major retailers like Wal-Mart Stores Inc. and Target Corp. expanding into the grocery sector, and rapid growth in the market for high-priced health-conscious chains like Whole Foods Market Inc. and Fairway Group Holdings Corp., A&P has been outperformed since 2012.

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.