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Business Title: A&P, Century-Old U.S. Grocery Store Owner, Files for Bankruptcy Dec. 13 (Bloomberg) -- The Great Atlantic & Pacific Tea Co., which operates almost 400 supermarkets under the Waldbaum’s, The Food Emporium and Pathmark names, sought bankruptcy protection after failing to successfully compete with wholesale clubs and drugstores. The retailer had $8.8 billion in sales for the year ended in February, according to its website. Yesterday, it listed assets of $2.5 billion and debt of $3.2 billion in a Chapter 11 filing in U.S. Bankruptcy Court in White Plains, New York. A shift in consumer spending to wholesale clubs, supercenters and drugstores hurt sales in the quarter ended Sept. 11, A&P said in a regulatory filing. The Montvale, New Jersey-based retailer, incorporated 110 years ago, also runs stores under its own name and as Super Fresh and Food Basics. “We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring,” Chief Executive Officer Sam Martin said in a statement yesterday. “We could not complete our turnaround without availing ourselves of Chapter 11.” The company announced a turnaround plan in July that included closing 25 stores in five states. In September, it said it would sell another seven stores in northern Connecticut. Restoring competitive margins, remodeling stores and increasing cash flows were all goals, the company has said. Tengelmann Stake Meeting liquidity needs, given that debt totaling $165 million was coming due June 15, 2011, was a reason for its initial move to restructure out of court, the company said in regulatory filings. “The company couldn’t compensate for the combination of high debt and the suddenly fading purchasing power of the customers,” Karl-Erivan Haub, chief executive officer of Tengelmann Group, A&P’s biggest shareholder, said in an e-mailed statement today. The insolvency will help A&P to get a “solid financial basis, to advance necessary restructuring,” he added. Tengelmann, which owns Germany’s biggest home-improvement retailer, OBI, and the Kaiser’s supermarket chain, sees no impact on its other business from A&P’s insolvency, spokeswoman Jutta Meister said in an interview. The closely held retailer has previously written down the value of its A&P stake in the past and will now cut it to zero, she added. Tengelmann, which has had an A&P stake since 1979, owns about 40 percent of the company. The stake had a value of about $64 million when markets closed Dec. 9, according to data compiled by Bloomberg. $800 Million Loan A&P secured $800 million in debtor-in-possession financing from JPMorgan Chase & Co. and will have immediate access to a $187 million loan and $200 million in letters of credit, allowing it to keep stores open, according to the filing. In October, Standard & Poor’s downgraded A&P’s debt and said it didn’t expect “material improvements in operating performance.” According to its most recent quarterly report, A&P had a net loss of $153.7 million for the quarter ended Sept. 11. Shares fell 67 percent to 93 cents on Dec. 10 in New York Stock Exchange trading. The stock has declined 92 percent this year. A&P was incorporated in New Jersey in 1900, 41 years after having opened the first store on Vesey Street in New York under the name The Great American Tea Company. It changed its name to The Great Atlantic & Pacific Tea Company in 1869, in honor of the completion of the coast-to- coast transcontinental railroad and its intention to operate stores across the country, according to its website. 15,357 Stores The company expanded to California, Washington and Canada in the 1930s, with 15,357 stores across the continent. In yesterday’s court filing, the retailer sought permission to pay employee wages and continue customer programs, such as refunds and price guarantees. Without such approval, the company would “risk losing market share and raising unnecessary doubts about their operations,” lawyers for the company wrote in court papers. Kirkland & Ellis LLP represents A&P in the bankruptcy. Lauren La Bruno, a spokeswoman for A&P, didn’t immediately return a call seeking comment after business hours yesterday. In July, A&P hired Sam Martin as its second new chief executive officer this year, replacing Ron Marshall, who had held the job since Feb. 8. Company Director Bobbie Gaunt resigned from the A&P board Nov. 28, according to a filing. Restructuring Chief Frederic Brace, A&P’s chief administrative officer, was named chief restructuring officer, he said in a court document. Brace had been the chief financial officer of UAL Corp., parent of United Airlines, and helped guide the carrier through 38 months of bankruptcy restructuring that ended in 2006. The supermarket operator has 41,000 employees, 95 percent of whom are covered by union agreements, according to the bankruptcy petition. Labor costs mean it has less flexibility to invest in other parts of the store, said Jim Hertel, a managing partner at Willard Bishop Consulting, a Barrington, Illinois-based firm which advises retailers and suppliers. A&P has an interest payment of $13.4 million due Dec. 15 on unsecured notes, Brace said in his filing. “Failure to make these payments would cause immediate issues” under the debt agreement, he said. A&P also has legacy obligations that put it at a competitive disadvantage, including paying rent on stores the company hasn’t been able to sublease or terminate the leases for, Brace said. The rent expenses for the mostly empty stores will be $77 million next year, he said. The company also has about 70 percent of inventory tied to one supplier in an unfavorable contract, Brace said. Union agreements, including pensions and health care obligations also put the company at a competitive disadvantage and “are unsustainable at existing levels,” Brace said. The case is: Re The Great Atlantic & Pacific Tea Co. 10- 24549. U.S. Bankruptcy Court for the Southern District of New York (White Plains).
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#1. To: Brian S (#0)
I had no idea that they were still around. I remember them from the 1960s when I was a little kid. I haven't heard about them for 40 years.
A&P left the mid-michigan market decades ago but I do remember the one A&P we had in town. Old time grocer indeed. It is now a Family Dollar. To think, we used to have a S. S. Kresge, Woolworth's, Grants and several department stores all within our downtown. Now there is nothing left downtown but county and city gov't offices with little to offer for retail shoppers.
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