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The speculation has been put to rest: The Great Atlantic & Pacific Tea Co. (A&P) is filing for Chapter 11 bankruptcy protection for the second time in five years. The move by the financially troubled retailer comes only three years after emerging from court protection with the help of an investor group led by Ron Burkle’s Yucaipa Cos.
In a filing with U.S. Bankruptcy Court in the Southern District of New York, the Montvale, N.J.-based grocer said it has in excess of 100,000 creditors, $1 billion-plus in liabilities and more than $1 billion in assets. The company, which voluntarily filed for Chapter 11, intends to sell as many of its 296 stores it can, and currently has bidders lined up for 120 locations at a combined purchase price of about $600 million.
As Progressive Grocer reports separately, Ahold's New York-based Stop & Shop division will acquire 25 of A&P's metro N.Y. Waldbaums, Pathmark and A&P stores and will convert them when the transaction closes, which is expected to wrap up in the second half of 2015.
In addition, A&P said it secured financing of $100 million. All asset and store sales will be conducted through a court-supervised sale process, subject to court approval and certain other conditions, which could also include a possible credit bid for certain assets to be purchased by A&P’s current investors.
"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," said A&P CEO Paul Hertz, adding that "interest from other strategic operators has been robust during the company's sale process to date, and we have every expectation that will continue in Chapter 11."
In tandem with the move, Christopher McGarry – most recently chief administrative officer and prior to that, EVP and general counsel – has been appointed chief restructuring officer, effective July 19.
25 Other A&P Stores Will Close
In conjunction with the court-supervised sale process, A&P also said it "will close 25 stores in the near term due to lack of interest and significant ongoing store operating losses. The open stores are fully stocked, with a complete range of high quality products, and all existing customer promotional and loyalty programs will stay in place during this process." According to Hertz, the bankruptcy and store closures would help to "preserve as many jobs as possible" and "maximize value for all stakeholders."
In conjunction with A&P's bankruptcy filing, the retailer posted letters to customers on its website regarding stores that are to remain open, as well as those which are set to close, which are undersigned by Greg Mays, company chairman.