Great Atlantic & Pacific Tea Co. is considering a bankruptcy filing among possible options as the 156-year-old grocer works to cut costs, according to people familiar with the situation.
A filing, which would be the chain’s second in five years, could come as soon as next month, said the people, who asked not to be identified because the discussions aren’t public. Bids for A&P were due last month as part of an auction for the company, but no viable offers for the entire chain were received, the people said. That means the stores could be sold piecemeal, marking the end of what was once the largest U.S. grocer.
The company said in March that it was reviewing strategic alternatives for the business, and that process continues, according to Hugh Burns, a spokesman for Montvale, New Jersey-based A&P at Sard Verbinnen & Co.
“No decision has been made regarding a particular outcome, and it would be inaccurate and irresponsible to suggest otherwise,” he said in an e-mailed statement. The chains owned by A&P are “open for business as usual and will remain so throughout the strategic review process. The company is committed to continuing to serve its customers and communities as it always has and intends to keep its stores fully staffed.”
The company has two loans totaling $270 million, according to data compiled by Bloomberg. The loans, along with a $300 million revolving line of credit, mature in September 2019. In addition to the senior loans, the company took on $420 million in junior-ranking debt as part of its exit from bankruptcy in 2012, according to court documents.
Rise and Fall
A&P began in 1859 as the Great American Tea Co., a mail-order business for tea and spices. By 1929, it had 15,000 stores and sales of $1 billion. The company helped pioneer the modern supermarket industry, offering more of a no-frills experience than traditional shops. But in recent years it struggled to compete with upstarts like Whole Foods Market Inc. and Trader Joe’s. The company’s stores came to seem dated, and A&P became increasingly saddled with the burden of high pension costs and other labor expenses.
Those obligations could push the grocer into bankruptcy court, the people said, although an agreement could yet be reached to forestall Chapter 11.
Evercore Partners Inc., the New York-based investment bank, has been leading the sale process, while FTI Consulting Inc. is working to improve the company’s operations, the people said.
Dana Gorman, a spokesman for Evercore at Abernathy Macgregor Group, declined to comment. Mollie Hawkes, a spokeswoman for FTI, didn’t respond to messages seeking comment.
A&P’s options include “raising new capital from investors, considering new business partner relationships and exploring the sale of certain assets of the company,” Burns said. “Because of its improved capital, the company is well positioned to consider these opportunities. The company has not set a timetable for the completion of the process.”
A&P previously sought bankruptcy protection in December 2010. At the time, it had about 400 stores operating under the Waldbaums, SuperFresh and Food Emporium brands, in addition to the A&P chain. The company exited bankruptcy with 320 stores in 2012, re-emerging as a privately held company owned by an investor group that included Ron Burkle’s Yucaipa Cos.
The company, once known for its Eight O’Clock Coffee brand, opened its first store on Vesey Street in downtown New York City, selling tea, coffee and spices. The company even launched the country’s first national radio show, featuring the likes of Kate Smith and a group called the A&P Gypsies.
By this century, the chain was fending off growing competition from the likes of Wal-Mart Stores Inc., now the largest U.S. grocer, and local chains like ShopRite. To bulk up in the Northeast, A&P bought Pathmark Stores Inc., another New Jersey-based chain, for about $1.4 billion in cash and debt in 2007. While the transaction added about 140 stores, it also combined two struggling companies.
In January 2010, A&P named Ron Marshall, a former chief financial officer at Pathmark, as its chief executive officer. Marshall took the job after resigning as CEO from the now-defunct bookseller Borders Group Inc. Less than a year later, A&P sought protection from creditors.