A&P back in bankruptcy, inks $600 million in sale deals for 120 stores

By Caroline Salls

Pittsburgh, July 20 – The Great Atlantic & Pacific Tea Co., Inc. (A&P) filed Chapter 11 bankruptcy Sunday in the U.S. Bankruptcy Court for the Southern District of New York.

The company said on its website that it executed asset purchase agreements covering about 120 stores at a purchase price of roughly $600 million.

While some stores will close in the near term, A&P said the vast majority will continue serving customers.

Chief restructuring officer Christopher W. McGarry said in a statement filed with the court that the company filed its Chapter 11 cases to implement a comprehensive asset sales strategy.

Following an unsuccessful merger and acquisition process in 2014, McGarry said A&P refinanced its credit facilities and completed a strategic review process to find the best path forward to save jobs and maximize value.

Stalking horse bids

McGarry said the company has entered into three stalking horse asset purchase agreements for the going-concern sale of 120 stores, which employ 12,500 employees.

Specifically, Acme Markets, Inc. agreed to pay $256 million and other consideration for 76 stores and other assets. If Acme is not the high bidder in its sale, it will receive a 1.5% break-up fee and reimbursement of up to $4.5 million of its expenses.

The Stop & Shop Supermarket Co., LLC agreed to pay more than $146 million plus other consideration for 25 stores and other assets. If Stop & Shop is not the high bidder, it will receive a 3% break-up fee and an up to $1 million expense reimbursement.

Key Food Stores Co-Operative, Inc. agreed to pay $28 million plus other consideration for 19 stores and other assets. If Key Food is not the high bidder, it will receive a 3% break-up fee and reimbursement of up to $250,000 in expenses.

Non-binding indications of interest are due by Aug. 24, and global binding bids are due by 5 p.m. ET on Sept. 11.

The CRO said A&P is in continuing talks with other interested parties as part of the sale process and expects to enter into many transactions for the sale of additional stores on a going-concern basis during the Chapter 11 process.

Strategic review process

McGarry said the strategic review and sales process confirmed to the company that its businesses are not sustainable over the long term under the current cost structure.

No bidder has been willing to assume A&P’s liabilities, particularly its substantial labor and pension obligations, in connection with a purchase of the stores.

The stalking horse bids all call for negotiating with the company’s unions to reach agreements for employment with affected employees, McGarry said.

DIP financing

In connection with the bankruptcy filing, A&P secured a commitment for $100 million in junior-lien debtor-in-possession financing from Fortress Credit Group. Fortress Credit Corp. is the administrative and collateral agent.

Interest will be Libor plus 1,150 basis points with a 1% floor.

The facility will mature on the earliest of one year after the closing date, 45 days after entry of the interim order if a final order has not been entered, the date of acceleration of the obligations and termination of the commitments following an event of default, a sale of all or substantially all of the company’s assets, the effective date of a Chapter 11 plan and the occurrence of a cash collateral termination event.

The DIP financing agreement requires the company to file a motion to reject 25 cash-flow negative stores within 10 days, to file a sale motion seeking approval of bidding and auction procedures within 20 days, to obtain a bidding procedures order within 45 days, to vacate the premises of the 25 initial closing stores within 60 days, to obtain approval of the sales by Oct. 15 and to close the sales by Oct. 30.

The company is seeking initial interim access to $50 million of the financing.

Debt details

According to court documents, A&P had $1.6 billion in assets and $2.3 billion of debt as of Feb. 28.

The company’s largest unsecured creditors are:

• C&S Wholesale Grocers, Inc. of Keene, N.H., with a $39.36 million trade debt claim;

• McKesson Drug Co. of San Francisco, with an $8.35 million trade debt claim;

• Facility Source, LLC of Columbus, Ohio, with a $6.71 million trade debt claim;

• Coca-Cola Enterprises, based in Atlanta, with a $4.76 million trade debt claim;

• Mondelez Global LLC of East Hanover, N.J., with a $3.16 million trade debt claim;

• Garelick Farms Inc. of Franklin, Mass., with a $2.37 million trade debt claim;

• Mindy Klarman of Rockaway, N.J., with a $1.82 million litigation claim;

• Manhattan Beer of Bronx, N.Y., with a $1.2 million trade debt claim; and

• Entenmann’s Bakery of Pittsburgh, with a $1.07 million trade debt claim.

The company is represented by Weil, Gotshal & Manges LLP.

This is the second A&P bankruptcy filing in five years. The Chapter 11 plan for the previous case filed in December 2010 took effect on March 13, 2012. A&P emerged from the earlier case as a private company.

A&P is a Montvale, N.J.-based operator of supermarkets. The Chapter 11 case number is 15-23007.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.