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Arizona's largest retailer files for bankruptcy protection

by Tim Linden | July 19, 2009
Bashas', Arizona's largest grocery store retailer with 158 stores, filed for bankruptcy protection in mid-July and announced that it would close 10 stores by July 21.

The amount of produce debt covered by the PACA Trust amendment appears to be in the neighborhood of $5 million, and experts expect that it will be paid. In fact, Bashas' has informed its creditors that it hopes to reorganize and emerge from bankruptcy within three months.

The firm blamed the national credit crisis and slow growth in Arizona for its financial woes. The retailer announced that closing 10 underperforming stores and other cost-cutting measures would result in the elimination of about 1,000 jobs.

Arizona has been hit hard by the economic slowdown as the construction industry is it largest employer. All but two of Bashas' stores are located within the state.

During a news conference announcing the bankruptcy action, company President Mike Proulx was quoted as saying, "The current population cannot fully support the overabundance of stores in what has become the most fiercely competitive grocery market in the country."

He also blamed ongoing friction with a union trying to organize the company's workers.

Bashas' has obtained $45 million in financing to fund ongoing operations. Financial experts reasoned that during the bankruptcy period, Bashas' may be able to negotiate more favorable terms with creditors as well as more easily abandon store leases and other contracts.

In its bankruptcy filing, Bashas revealed that it owed its six largest creditors more than $1 million each, with Cardinal Health at $2.76 million and Phoenix Coca-Cola Bottling Co. at $2.56 million.

With news of the bankruptcy circulating, produce creditors began to surface, contacting PACA attorneys and groups such as Western Growers Association to determine the steps they should take.

Tom Oliveri, director of trade practices for WGA, said that an early estimate of the produce debt put it at about $5 million. Because of the PACA Trust amendment that puts produce creditors first in line in bankruptcy proceedings, Mr. Oliveri said every indication is that all the produce debt will be paid. In fact, he said produce creditors were being told by Bashas' buyers that all debts will be paid, and were being asked to continue to supply the retailer with fresh fruits and vegetables.

He said it appears that several produce creditors are owed mid-six-figure amounts, with many other debts in the $25,000 to $100,000 range.