Grocery chain Great Atlantic & Pacific Tea Co files for bankruptcy
NEW YORK: Grocery store chain Great Atlantic & Pacific Tea Co (GAP.N) filed for bankruptcy on Sunday, drained of cash by tough competition and a sluggish economic recovery.
Once the largest U.S. grocer, the owner of about 400 stores under brands such as A&P, Waldbaum's and Super Fresh filed for Chapter 11 bankruptcy in New York with more than $1 billion in assets and more than $1 billion in debt, according to court documents.
As of September 11, A&P had total debt of more than $3.2 billion, but it is unclear how much the company is currently carrying.
JP Morgan Chase & Co (JPM.N) will provide $800 million in debtor-in-possession financing, the company said. The U.S. Bankruptcy Court for the Southern District of New York will hold a hearing on Monday to approve a portion of the facility.
The Montvale, New Jerseybased company said its stores will remain fully stocked and open with no interruption of business. It has struggled since it acquired Pathmark Stores in 2007 with a $1.4 billion financing package.
A&P had nearly $9 billion in sales in its fiscal year to February 2010, but it has been bleeding cash at a rate of nearly $5 million a week.
The company reported having less than $100 million in cash and short-term investments on hand in September and it faces debt maturities in June.
Its biggest stockholders are activist investor Ron Burkle and the German retail group Tengelmann. A&P said in a statement that its major shareholders support the action.
Burkle's Yucaipa investment firm has built up a large position in the company's debt recently, which could put it in a stronger position to control the bankruptcy, according to people familiar with the firm's activities.
A&P has been challenged by the economic downturn and competitors including warehouse clubs and discount retailers, Frederic Brace, the company's chief restructuring officer, said in court documents. -Ap