Great Atlantic & Pacific Tea Co., the once-dominant grocery-store chain founded in 1859, may file for bankruptcy in the coming days to restructure debt, two people with knowledge of the matter said.
A filing to reorganize under court protection may come as soon as this weekend, said the people, who declined to be identified because the matter is private. A&P hired law firm Kirkland & Ellis LLP to represent it in negotiations with creditors and in any Chapter 11 proceeding, the people said.
Lauren La Bruno, an A&P spokeswoman, didn’t immediately return an email and a call seeking comment.
The Montvale, New Jersey-based grocer has struggled to cope with mounting competition from discounters such as Target Corp. and Wal-Mart Stores Inc., which are offering more fresh food to attract customers. A&P, which operated almost 16,000 stores in the 1930s, now runs about 400 locations under its namesake banner as well as SuperFresh and Food Emporium. In 2007, it bought the Pathmark Stores supermarket chain for $678 million.
The grocer in October said sales in the quarter ended Sept. 11 fell 7.1 percent to $1.9 billion and its net loss almost doubled to $153.7 million in that period. A&P had $94 million in cash and short-term investments as of Sept. 11, a 63 percent decline from $252 million as of the end of February.
The company had about $1.5 billion in net debt as of September. It had an $876 million net loss on $8.8 billion in 2009 sales, its third straight annual shortfall.
A&P “may be illiquid at some point in the near term,” Standard & Poor’s said in July, issuing a downgrade of the company’s corporate credit rating to CCC.
Chief Executive Officer Sam Martin was hired in July to help lead a turnaround, replacing Ron Marshall, who had held the job for about six months. Martin has said then that A&P is examining its business in an effort to improve results.
The company announced a $89.8 million sale-leaseback of six stores last month. In August, A&P said it will close 25 stores in five states as part of its turnaround plan.
The stock fell $1.10, or 39 percent, to $1.73 at 10:07 a.m. today in New York Stock Exchange trading. Before today it had dropped 28 percent since July 22, the day before A&P announced Martin’s appointment as chief.
The Great American Tea Co. began as a store on Vesey Street in lower Manhattan, selling coffee, tea and spices and dispatching salesmen in horse-drawn carriages through New England, the Midwest and South, according to the company’s website. The grocer renamed itself The Great Atlantic & Pacific Tea Co. in 1869.
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