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
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.