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Produce suppliers not overly concerned with A&P bankruptcy filing

by Tim Linden | December 12, 2010
The Dec. 12 Chapter 11 bankruptcy filing by the Great Atlantic & Pacific Tea Co. should not have much of an impact on the chain's produce creditors due to the protection afforded by PACA Trust provisions, which puts produce debt in a priority position over other creditors.

The filing is a debtor-in-possession bankruptcy, which allows the retailer to be in control of its cash flow without needing court approval for every transaction. In concert with the filings, A&P announced that it had secured access to an operating budget of $800 million through JPMorgan Chase & Co.

The nation’s oldest retailer is expecting to continue operations in a normal fashion as it moves through bankruptcy. In the court filing, A&P listed assets of about $2.5 billion and debt of more than $3.2 billion. The company reported revenue of $9.5 billion in 2008, but that dropped to $8.8 billion in 2009 amid declining sales.

"We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring," Chief Executive Officer Sam Martin in a Dec. 12 statement. “We could not complete our turnaround without availing ourselves of Chapter 11.”

The company buys much of its produce and groceries through Hatfield, MA- based C&S Wholesaler Grocers Inc. and its perishable division, C&S Wholesale Produce. In fact, a Dec. 13 article in The Wall Street Journal stated that 70 percent of A&P supermarket products come through C&S. Several produce suppliers said the regular course of business with A&P is to deal with the A&P buyers for the orders that are then invoiced to C&S Wholesale Produce, which also handles the logistics.

“It’s a two-for-one deal,” said one California grower-shipper. “If you sell A&P, you are also selling C&S.”

Tom Oliveri, director of commodity services and trade practices for WGA, said that after making several calls it appears that most shippers who deal with A&P sell through C&S and therefore do not need to do anything to preserve their rights under the Trust provisions of the Perishable Agricultural Commodities Act.

In any event, Mr. Oliveri said that A&P’s produce creditors should be paid first under the PACA Trust and that motion has likely already been made in bankruptcy proceedings. He said the large amount of money on hand through the debtor-in-possession package should alleviate any concerns shippers have of getting paid.

Indeed, a California vegetable shipper who requested anonymity said this action “should not have surprised anyone. Everyone knows that A&P has been having difficulties and that this was a real possibility. We have kept a close eye on the credit situation and I see no reason why we won’t continue to sell them through the bankruptcy. This has happened with a number of retailers over the years and in the end it usually works out. Sometimes it is difficult, but it usually works out.”

Bryan Granger, a spokesperson for C&S, said the firm would have no comment on the A&P bankruptcy. “We are referring all calls to A&P,” he said. “We have nothing to say about it.”

A&P operates 395 stores under the A&P, Waldbaum’s, The Food Emporium, Super Fresh, Pathmark and Food Basics banners around the Northeast.