For the second time in five years, supermarket chain A&P filed for Chapter 11 bankruptcy, which will result in the sales of their stores. A&P, founded in 1859, was formerly known as The Great Atlantic & Pacific Tea Co. and renamed to its current form in 1869.
Chapter 11 bankruptcy allows falling companies to reorganize business strategies to reduce debts and create a more secure and stronger practice. The approval of the court and creditors is required to arise from bankruptcy.
The Montvale, New Jersey based company arranged tentative deals with several grocery chains that would acquire 120 of its stores along with the 12,500 employees for nearly $600 million. The company plans to make further sales of its stores to other suitors accordingly, however, many buyers oppose to acquire the company's pension obligations.
According to A&P, about 25 stores will close immediately.
The company claims to have over 100,000 creditors along with more than $1 billion in liabilities and $1 billion in assets. Financial debts total about $925 million while trade debts are about $140 million, not including the $39 million owed to A&P’s largest supplier, C&S Wholesale Grocers. Without the proposed sales, A&P will have “no choice but to liquidate their business in a fire sale and piecemeal fashion,” said Great Atlantic & Pacific Tea Co. chief restructuring officer Christopher McGarry. “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.”