MONTVALE, N.J. — Battling hefty debt and intense competition, grocer A&P filed for bankruptcy on Sunday and has secured $800 million in debtor-in-possessing financing to keep the 395-store chain open and operational during the proceedings.
"We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring. 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," A&P president and CEO Sam Martin stated.
The grocer listed total debts of more than $3.2 billion and assets of roughly $2.5 billion in a petition filed in bankruptcy court in White Plains, N.Y., according to a Wall Street Journal report.
A person familiar with the situation told the WSJ that A&P's inability to negotiate concessions from its primary supplier, C&S Wholesale Grocers, contributed to the company's decision to file for bankruptcy.
Furthermore, the retailer had about $13 million in interest payments due to unsecured creditors, the WSJ reported, and wanted to keep those funds rather than pay them to those that would be further down in the payment scale during bankruptcy proceedings.
According to A&P, as it implements its financial and operational restructuring, it intends to continue and accelerate most of the basic elements of the turnaround plan announced in October, including:
A completely new management team that is in place;
The reduction of structural and operating costs;
The improvement of the A&P value proposition for customers; and
The enhancement of the customer experience in stores.
The company also announced that Frederic F. "Jake" Brace, who was named chief administrative officer in August, will lead the company's restructuring effort. Brace will take the additional title of chief restructuring officer. The retailer has entered into an $800 million DIP facility with JPMorgan Chase. A hearing to approve a portion of the facility has been scheduled for Dec. 13.
Upon approval, this DIP facility will be available to fund A&P's operations, pay its vendors and for other corporate purposes. In addition, this financing will provide the capital necessary to continue the company's efforts to improve and renovate select stores and provide enhanced product offerings to its customers, the company stated.