Fresh & Easy LLC filed for bankruptcy Friday, the second grocery chain backed by supermarket mogul Ron Burkle’s Yucaipa Cos. buyout firm to seek chapter 11 protection in recent months.
Fresh & Easy tumbled into bankruptcy in Wilmington, Del., the company’s second chapter 11 filing in two years. Last week, the company shut down its 97 stores and said it was hopeful that it could find a purchaser that would restart the business.
Fresh & Easy’s bankruptcy filing comes as the Great Atlantic & Pacific Tea Co., owned by Yucaipa and Mount Kellett Capital Management, navigates its second chapter 11 filing, selling and shutting down stores. Since filing for bankruptcy in July, A&P has sold 159 of 296 stores.
Mr. Burkle, a California-born billionaire and prominent Democratic fundraiser, founded Yucaipa 30 years ago. In 2002, former President Bill Clinton served as adviser to two Yucaipa investment funds. Mr. Clinton, a onetime friend of Mr. Burkle, ended his business relationship with Yucaipa in 2009.
The investment firm specializes in turning around troubled companies in the grocery sector, having held stakes in companies including Food4Less, Ralphs Grocery Co., Dominick’s, Wild Oats and Fred Meyer. The firm didn’t respond to request for comment on its two recently bankrupt grocery chains.
In late 2013, Fresh & Easy, which was then owned by British supermarket giant TescoPLC, sold the majority of its stores—about 150 at the time—to Yucaipa. The 2013 transaction, part of the company’s first trip through bankruptcy, provided Fresh & Easy with $120 million in new financing, but the stores were never able to reach profitability.
Fresh & Easy spokesman Brendan Wonnacott said last week that in the last two years, the company had made “progress on stemming our losses and moving the business closer to break-even,” but it ultimately ran out of liquidity and sources of financing.
In court documents Friday, Fresh & Easy provided no further information regarding its sale prospects but named Amir Agam of FTI Consulting Inc. its chief restructuring officer. It pegged its assets at between $10 million and $50 million and its debts in the $100 million to $500 million range.
Grocery chains have been squeezed by the expansion of food offerings at big-box retailers like Target Corp. and Wal-Mart Stores Inc. on one end and the expansion of high-end, healthy grocers like Whole Foods and Trader Joe’s on the other.
Haggen Holdings LLC, a West Coast chain that went to 164 stores from eight when it purchased a swath of Albertsons Cos. stores, is also in bankruptcy attempting to sell the stores that it can. So far, it has received two offers for 36 stores.
New York’s Fairway Group Holdings Corp. is also in financial trouble, according to Moody’s Investors Service, which called the company’s financial structure “unsustainable” and predicted that the company could breach its loan agreement during the next year. Fairway, an upscale grocer, has particularly struggled to compete with Whole Foods Market Inc., Moody’s said.
Fresh & Easy stores operate in Arizona, California and Nevada, and are branded as healthy but affordable grocery stores whose private-label products don’t contain artificial colors or preservatives or similarly unsavory ingredients.
Source: The Wall Street Journal