Haggen files Chapter 11 bankruptcy amid Albertson’s purchase issues

By Caroline Salls

Pittsburgh, Sept. 9 – Haggen Holdings, LLC filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

The company said it filed a lawsuit against Albertson’s LLC that alleges breach of an agreement under which Haggen purchased 146 of Albertson’s locations.

Haggen said the breach and other conduct “made the transitioning and rebranding [of Albertson’s stores] unsuccessful, leading to major drop-offs in customer levels at the new stores.”

“This, in turn, led to a severe liquidity crisis for the debtors,” the company said.

Haggen said it intends to reorganize around, or sell as a going concern, its core stores for the benefit of its creditors.

Unlike the core stores, the company said many of the recently acquired stores are unprofitable and represent a negative cash drain on the debtors’ business.

Haggen’s pre-bankruptcy lenders have offered a debtor-in-possession facility that will provide the needed liquidity to identify and document some value-maximizing transactions, the company said in a court filing, including sales of portions of the company’s prescription business and sales of a group or groups of the non-core stores to competitors.

Financing terms

In connection with the bankruptcy filing, Haggen obtained a commitment for $215 million of debtor-in-possession financing from its pre-bankruptcy lenders. PNC Bank, NA is the DIP loan agent.

Interest will be the alternate base rate plus 300 basis points.

The facility will mature on the earliest of Feb. 5, the effective date of a reorganization plan, the closing of the core stores sale, conversion or dismissal of the Chapter 11 case and the 22nd day after the bankruptcy filing date if a final order has not been entered.

Debt details

According to court documents, Haggen has more than $50 million of assets. The company’s debt includes $154.07 million outstanding on a revolving credit facility, $25 million outstanding under a subordinated loan agreement and $91.42 million of trade debt.

The company’s largest unsecured creditors are

• United Grocers – Corporate of Commerce, Calif., with a $14.87 million trade payable claim;

• Topco Associates Inc. of Elk Grove Village, Ill., with a $5.72 million trade payable claim;

• Merlone Geier of San Francisco, with a $5.67 million contract liability claim;

• Dale C. Henley, with a $4.89 million deferred compensation claim;

• Charlies Produce Inc. of Seattle, with a $3.48 million trade payable claim;

• Moneygram of Dallas, with a $2.51 million trade payable claim;

• Pepsi-Cola of Purchase, N.Y., with a $1.71 million trade payable claim;

• Coca-Cola, based in Atlanta, with a $1.63 million trade payable claim;

• DIP Specialty Foods of Ontario, Calif., with a $1.41 million trade payable claim; and

• Fintech of Tampa, Fla., with a $1.18 million trade payable claim.

The company is represented by Young Conaway Stargatt & Taylor, LLP.

Haggen is a Bellingham, Wash.-based supermarket company. The Chapter 11 case number is 15-11874.

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