MONTVALE, N.J. — Troubled food and drug retailer A&P has filed for Chapter 11 bankruptcy protection.
A&P announced the bankruptcy filing Sunday night, not long after media reports surfaced before the weekend that the company, which operates about 250 pharmacies, was mulling Chapter 11 protection.
The retailer noted that the Chapter 11 process will facilitate its financial and operational restructuring, aimed at restoring the company to long-term financial health. A&P said that all of its 395 stores remain open and are fully stocked.
A&P operates 374 supermarkets under the A&P, Pathmark, Super Fresh, The Food Emporium and Food Basics banners in New York, New Jersey, Connecticut, Pennsylvania, Delaware, Massachusetts, Maryland, Virginia and Washington, D.C. It has 251 pharmacies under the A&P, Pathmark, Waldbaum’s, Super Fresh and Food Basics banners as well as 21 A&P Liquor stores.
"We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring," president and chief executive officer Sam Martin said in a statement. "While we have made substantial progress on the operational and merchandising aspects of our turnaround plan, we concluded that we could not complete our turnaround without availing ourselves of Chapter 11. It will allow us to restructure our debt, reduce our structural costs, and address our legacy issues."
The struggling retailer has entered into an $800 million debtor-in-possession (DIP) facility with JPMorgan Chase & Co, which received approval from the U.S. Bankruptcy Court for the Southern District of New York on Monday night. Of the total DIP facility, a $350 million term loan will be immediately funded, according to A&P.
The court also granted A&P’s motion to approve its request for “first day orders,” including immediate authority to pay employee salaries and wages and to continue providing them health and other benefits; authority to pay certain pre-petition obligations to critical vendors and suppliers in the ordinary course; and authority to continue to satisfy all of its pre-petition obligations to customers, including existing loyalty and promotional programs. A&P added that the court also entered various other orders to ensure that the company can operate smoothly during the Chapter 11 process.
A&P has named chief administrative officer Jake Brace to lead the restructuring effort and has given him the additional title of chief restructuring officer.
When A&P released its second-quarter results in late October, which included a 6.6% decline in comparable-store sales and a net loss of $153.7 million, or $2.95 per share, executives cautioned that negotiations for new financing would require several more weeks. In its 10-Q filing, management warned that if the refinancing did not go through and liquidity did not improve, "there is substantial doubt about our company’s ability to continue as a going concern."
"With the protections afforded by the bankruptcy code and the backing of a new, pre-eminent lender, we can make strategic decisions that will benefit the company over the long term, enabling A&P to emerge with a new capital structure and in a much improved position to exploit its fundamental strengths," Martin added.
A&P is the 25th-largest pharmacy operator by pharmacy count and the 31st-largest by pharmacy dollar volume, estimated at $582.3 million, according to Chain Drug Review‘s 2010 Annual Report of Retail Pharmacy.
