After several months of speculation, Great Atlantic & Pacific Tea Co. (A&P) has officially filed for Chapter 11 bankruptcy for the second time in five years.
“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,” said Paul Hertz, President and Chief Executive Officer of A&P. “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.”
The company has already lined up deals with three grocery chains that would acquire 120 of its stores employing 12,500 employees for nearly $600 million, USA today reported. Ahold also announced that its Stop & Shop branch will acquire 25 of these locations at a cost of $146 million.
The grocery chain filed for bankruptcy protection in a federal court in the Southern District of New York, citing about $2.3 billion in debts and listing $1.6 billion in assets, according to USA Today. A&P also has two loans totaling $270 million, according to data compiled by Bloomberg, taking on an additional $420 million in junior-ranking debt as part of its exit from bankruptcy in 2012. At the time, it had lost around $123 million on sales of almost $1.6 billion in its latest quarter, according to a regulatory filing.
Without the proposed sales, A&P will have "no choice but to liquidate their business in a fire sale and piecemeal fashion," Great Atlantic & Pacific Tea Co. Chief Restructuring Officer Christopher McGarry said in the filing. "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.”
The company has several sources of secured financing, according to USA Today, including investors represented by U.S. Bank ($677.1 million) and Wells Fargo Bank ($561 million). A&P listed supplier C&S Wholesale Grocers Inc. as its largest unsecured creditor with $39.4 million in claims. The next four largest unsecured creditors are McKesson Drug Co. ($8.4 million), Facility Source LLC ($6.7 million), Coca-Cola Enterprises ($4.8 million) and Mondelez Global LLC ($3.2 million).
Great Atlantic & Pacific Tea Co. has 296 supermarkets and other stores under several brands, including A&P, Waldbaum's, SuperFresh, Pathmark, Food Basics, The Food Emporium, Best Cellars, and A&P Liquor.