A&P is planning to file for bankruptcy, the second time in less than five years the grocery chain has sought creditor protection amid stiff competition.
The company, formally known as the Great Atlantic & Pacific Tea Co. on Sunday night was putting the finishing touches on a chapter 11 filing with the U.S. Bankruptcy Court for the Southern District of New York, according to a person familiar with the matter.
A&P has lined up bidders for 120 of its 296 stores with total expected proceeds of about $600 million, the person said. It will seek buyers for the rest of the stores as part of the bankruptcy process.
The 156-year-old company, like some other traditional supermarket operators, in recent years has experienced declining sales and profit margins as big low-cost operators like Wal-Mart Stores Inc. and Dollar General Corp. have expanded into the grocery business. At the same time, chains catering to health-conscious consumers, like Whole Foods Market Inc. have attracted higher-end shoppers.
That has led a number of grocery chains to look for buyers. A&P in 2013 began looking at financial options including a potential sale about a year after emerging from a 2010 bankruptcy filing, The Wall Street Journal reported at the time. But it was unable to attract a buyer for the whole company on acceptable terms.
The company, based in Montvale, N.J. has about 34,000 employees. A&P management believes the current plan represents its best option for preserving as many of those jobs as possible.
The company operates in Connecticut, New York, New Jersey, Pennsylvania, Delaware and Maryland under the A&P, Best Cellars, Food Basics, Food Emporium, Pathmark, Superfresh and Waldbaum's brands. It doesn't disclose its financials or results.
As part of the bankruptcy process,
other bidders will have the option to top the existing agreements for the 120 stores, the person said. A&P plans to close 25 stores that haven't drawn much buyer interest and are bleeding cash. The company will continue to do business at the other stores during the sales process.
Fortress Investment Group LLC has agreed to provide A&P with $100 million in bankruptcy financing that will help enable the company to keep paying its bills. Fortress this year invested in Mount Kellett Capital Management LP, a private-equity and hedge-fund firm that backed A&P's exit from it previous bankruptcy.
A&P, which is part owned by Ron Burkle's Yucaipa Cos. emerged from chapter 11 bankruptcy protection in March 2012 as a privately held company after securing $490 million in debt and equity financing and shutting dozens of its stores.
A&P had about 400 supermarkets before filing for its prior bankruptcy in December 2010.
The company, which was founded in 1859, began operations as the Great American Tea Co. according to its website. It was started as a mail-order business by George Huntington Hartford and George Gilman. The first store, on Vesey Street in Manhattan, sold coffee, tea and spices at low prices, according to the website.
Later renamed the Great Atlantic & Pacific Tea Co. in 1936 it became the first national supermarket chain in the country, according to the website.
Its filing is all the more noteworthy given U.S. corporate bankruptcies have been scarce of late, as investor demand for debt and an improved economy have helped many companies expand and finance their operations.
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