Fairway Group Files for Bankruptcy as Competition Revs Upby , , and
Gourmet grocer lists $387 million in debt, $230 million assets
Company's shares on Nasdaq fell 96 percent in last 12 months
Gourmet grocer Fairway Group Holdings Corp. filed for bankruptcy protection after reaching a restructuring deal with creditors.
The retailer, with more than a dozen locations in New York, New Jersey and Connecticut, has been struggling with growing competition from larger chains, including Whole Foods Market Inc., which have been drawing away shoppers looking for organic produce and unfiltered extra-virgin olive oil. The company’s shares have plunged 96 percent in the past 12 months, and it has received delisting warnings from the Nasdaq Stock Market.
Fairway joins other retailers seeking court protection from creditors as new competitive fronts have emerged. Youth clothing chains Quiksilver Inc. and Pacific Sunwear of California Inc. have wilted under pressure from online merchants and changing teen tastes, while similar forces have sent Sports Authority Inc. and Eastern Mountain Sports Inc. into bankruptcy.
New York-based Fairway may be a victim of poor timing. It went public three years ago as national chains like Whole Foods and Trader Joe’s started aggressively competing in New York City. Even Costco Wholesale Corp. has begun selling similar high-end products at lower prices. Fairway hasn’t reported a profitable quarter since the initial public offering.
Nathan Glickberg founded Fairway’s forerunner in 1933 as a fruit and vegetable stand before the business settled into a storefront on Manhattan’s Upper West Side, according to the chain’s website. In the 1970s, Nathan’s grandson Howie added groceries and specialty foods to the offerings, as well as expanding floor space. Sterling Investment Partners took a majority ownership stake in 2007. Within four years, Fairway had expanded to nine locations and employed 3,500 people.
The company listed liabilities of $387 million and assets of $230 million in Chapter 11 papers filed Monday in Manhattan bankruptcy court. Fairway said in a statement it’s arranged $55 million in financing to carry it through re-organization.
The company said its proposed restructuring plan would cut about $140 million in secured debt. All creditors but senior secured lenders would be paid in full, and union contracts would be honored. Senior lenders would get equity and $84 million of debt in the reorganized company. There will be no interruption to customer service at the company’s 15 stores, according to the statement.
The case is In re Fairway Group Holdings Corp., 16-11241, U.S. Bankruptcy Court, Southern District of New York (Manhattan).