At­lantic & Pa­cific Tea Co may file for bank­ruptcy

The Pak Banker - - Company& -

NEW YORK: Great At­lantic & Pa­cific Tea Co., the once-dom­i­nant gro­cery-store chain founded in 1859, may file for bank­ruptcy in the com­ing days to re­struc­ture debt, two peo­ple with knowl­edge of the mat­ter said.

The shares fell $1.90, or 67 per­cent, to 93 cents at 1:24 p.m. in New York Stock Ex­change trad­ing, the biggest drop in at least three decades, be­fore trad­ing was halted.

A fil­ing to re­or­ga­nize un­der court pro­tec­tion may come as soon as this week­end, said the peo­ple, who de­clined to be iden­ti­fied be­cause the mat­ter is pri­vate. A&P hired law firm Kirk­land & El­lis LLP to rep­re­sent it in ne­go­ti­a­tions with cred­i­tors and in any Chap­ter 11 pro­ceed­ing, the peo­ple said.

Lau­ren La Bruno, an A&P spokes­woman, didn't re­turn an e-mail and a call seek­ing com­ment.

A&P's largest share­holder is Ten­gel­mann Group, which op­er­ates a chain of Ger­man su­per­mar­kets and other stores. As of Oct. 22, the Muehlhe­im­based com­pany held al­most 40 per­cent of A&P's out­stand­ing shares. Ten­gel­mann is fam­i­ly­con­trolled and has had an A&P stake since 1979.

Mont­vale, New Jersey­based A&P has strug­gled to cope with mount­ing com­pe­ti­tion from dis­coun­ters such as Tar­get Corp. and Wal-Mart Stores Inc., which are of­fer­ing more fresh food to at­tract cus­tomers. A&P, which op­er­ated al­most 16,000 stores in the 1930s, now runs about 400 lo­ca­tions un­der its name­sake ban­ner and oth­ers in­clud­ing Wald­baum's, Su­perFresh and Food Em­po­rium. In 2007, it bought the Path­mark Stores su­per­mar­ket chain for $678 mil­lion.

A&P has lagged be­hind ri­vals on fresh food and pre­sen­ta­tion, said Jim Her­tel, a man­ag­ing part­ner at Wil­lard Bishop Con­sult­ing, a Bar­ring­ton, Illi­nois-based firm which ad­vises re­tail­ers and sup­pli­ers. A&P also has been ham­strung by a heav­ily union­ized work­force, he said.

A&P's la­bor costs mean the com­pany has less flex­i­bil­ity to in­vest in other parts of the store, Her­tel said to­day in a tele­phone in­ter­view.

The gro­cer in Oc­to­ber said sales in the quar­ter ended Sept. 11 fell 7.1 per­cent to $1.9 bil­lion and its net loss al­most dou­bled to $153.7 mil­lion in that pe­riod. A&P had $94 mil­lion in cash and short-term in­vest­ments as of Sept. 11, a 63 per­cent de­cline from $252 mil­lion as of the end of Fe­bru­ary.

Egan-Jones Rat­ings Com­pany to­day low­ered the com­pany's credit rat­ing to C from CC.

The com­pany had about $1.5 bil­lion in net debt as of Septem­ber. It had an $876 mil­lion net loss on $8.8 bil­lion in 2009 sales, its third straight an­nual short­fall.

A&P "may be illiq­uid at some point in the near term," Stan­dard & Poor's said in July, is­su­ing a down­grade of the com­pany's cor­po­rate credit rat­ing to CCC.

Chief Ex­ec­u­tive Of­fi­cer Sam Martin was hired in July to help lead a turn­around, re­plac­ing Ron Mar­shall, who had held the job for about six months. Martin said then that A&P was ex­am­in­ing its busi­ness in an ef­fort to im­prove re­sults.

The com­pany an­nounced a $89.8 mil­lion sale-lease­back of six stores last month. In Au­gust, A&P said it will close 25 stores in five states as part of its turn­around plan.

The Great Amer­i­can Tea Co. be­gan as a store on Ve­sey Street in lower Man­hat­tan, sell­ing cof­fee, tea and spices and dis­patch­ing sales­men in horse-drawn car­riages through New Eng­land, the Mid­west and South, ac­cord­ing to the com­pany's web­site. The gro­cer re­named it­self The Great At­lantic & Pa­cific Tea Co. in 1869. Once a na­tional chain, A&P now op­er­ates its stores only in the northeastern and mid-At­lantic re­gions of the U.S. More­over, TJX Cos. plans to cut 4,400 jobs as it con­verts 91 A.J. Wright stores into T.J. Maxx, Mar­shalls or Home­Goods stores and closes the brand's re­main­ing 71 lo­ca­tions.

The goal is to con­cen­trate man­age­ment and fi­nan­cial re­sources on larger, more profitable busi­nesses, the Fram­ing­ham, Mas­sachusetts­based dis­count re­tailer said to­day in a state­ment. Al­most half of the po­si­tions to be elim­i­nated are part-time.

TJX an­tic­i­pates that all 162 A.J. Wright stores, con­cen­trated in the northeastern U.S., will be shut by midFe­bru­ary, at a cost of about $150 mil­lion to $170 mil­lion, in­clud­ing as­set im­pair­ment and severance ex­penses. The com­pany said it ex­pects that con­vert­ing the 91 stores will take about eight weeks af­ter the Wright clos­ing.

T.J. Maxx and Mar­shalls at­tracted mod­er­ate-in­come shop­pers dur­ing the re­ces­sion, giv­ing TJX con­fi­dence that those two chains can win sales from con­sumers who shopped at A.J. Wright, Chief Ex­ec­u­tive Of­fi­cer Carol Mey­rowitz told an­a­lysts to­day on a con­fer­ence call.

"Man­age­ment may want to fo­cus its en­ergy on the core busi­nesses and Europe, and viewed A.J. Wright as a dis­trac­tion," Howard Tu­bin, an RBC Cap­i­tal Mar­kets an­a­lyst in New York, wrote to­day in a note to clients. He rates TJX as "out­per­form."

The shares rose 7 cents to $45.03 at 12:58 p.m. in New York Stock Ex­change com­pos­ite trad­ing. The stock had gained 23 per­cent this year be­fore to­day.

TJX is shut­ting A.J. Wright 12 years af­ter start­ing the chain to at­tract con­sumers less af­flu­ent than its T.J. Maxx and Mar­shalls shop­pers. The brand gen­er­ated sales of $779.8 mil­lion in the year that ended in Jan­uary. The com­pany is clos­ing the Wright dis­tri­bu­tion cen­ters in In­di­ana and Mas­sachusetts.

The unit that op­er­ates T.J. Maxx and Mar­shalls lo­ca­tions has the po­ten­tial for 2,300 to 2,400 stores, 300 to 400 more than TJX pre­vi­ously es­ti­mated, Mey­rowitz said in to­day's state­ment.

The Mar­maxx di­vi­sion op­er­ated 1,751 stores in U.S. as of Oct. 30, in­clud­ing 919 T.J. Maxx and 832 Mar­shalls venues, ac­cord­ing to a Nov. 16 state­ment. -Bloomberg

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