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MILAN, Ill. - Eagle Food Centers, Inc., which owns and operates 61 supermarkets in Illinois and Iowa, announced today that it and four of its wholly-owned subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The company cited competition from major grocery chains and "supercenter" retailers whose lower labor costs and economies of scale enable them to consistently operate more efficiently.
Eagle chairman, CEO and president Robert J. Kelly said, "Over the past two and a half years, we have made excellent progress in improving and strengthening the operating side of the business. We have significantly reduced corporate overhead and overall operating costs. Unfortunately, our cash constraints have made it increasingly difficult to service the company's high-yield debt obligations. We will need to make additional sacrifices and create an appropriate capital structure that will enable our company to be competitive in today's environment."
To maintain an uninterrupted flow of merchandise to its stores and support ongoing vendor relationships, the company has received commitments for $40 million in debtor-in-possession (DIP) financing from Congress Financial Corporation, which has provided the company's revolving credit facility since 1995. The company said that the DIP financing will provide continued funding of obligations to employees and suppliers, as well as other day-to-day operations of the company.
Kelly emphasized that neither the employees nor customers of its retail supermarkets will notice any difference in operations as a result of the filing. The company said it also expects that customer programs and policies will remain unchanged.
The company said it intends to commence negotiations with representations of its note holders on a restructuring of the company's debt. At the same time, it is considering possible sale alternatives.
"Quite simply, our size combined with labor costs that are among the highest in our industry makes it difficult to compete with the low-cost operators in our markets. After careful evaluation, management and the board have concluded that to ensure Eagle Food Centers' continued viability, provide it with greater access to the financial resources necessary to continue, and have the least impact on the jobs of its employees, a reorganization of our company is in the best interests of all of our constituents. The Chapter 11 process allows time for the company to restructure its debt, negotiate with the unions and to continue day-to-day business activities without interruption," Kelly said.
Eagle operates 60 Eagle Country Markets and one Bogo's Food and Deals. The company employs approximately 3,550 at its stores and its headquarters and central distribution facility in Milan, Illinois.