BELLINGHAM, Wash. — Brown & Cole here hopes it can emerge from Chapter 11 bankruptcy protection this fall with the help of a California investment group that has no previous ties to the food industry.
Craig Cole, president and chief executive officer of the 20-store chain, declined to name the potential investment group but said it has pledged $40 million in capital to refurbish the stores. The investor would also become the new majority owner, he said, although it has indicated it will leave management intact, Cole added.
Brown & Cole Inc. currently owns 75% of the operating company, Brown & Cole LLC, with the balance owned by Associated Grocers, Seattle, which is in the process of being sold to Unified Grocers, Los Angeles.
Brown & Cole filed for Chapter 11 last November, when it was operating 27 stores doing annual volume of $275 million. The company subsequently closed seven stores that were underperforming or had restrictive leases; the remaining 20 stores “are doing quite well” with combined annual sales of $220 million, Cole said.
The company filed its plan of reorganization with the courts in early July, but no date for a hearing has been set, Cole told SN. He said the company's unsecured creditors committee has already endorsed the plan.
Brown & Cole is also in discussions with the United Food and Commercial Workers union “to make the reorganization plan work.”
“We're asking employees and union officials to help us identify cost reductions we can live with to make this work. We still want to be a good employer that pays well and offers health care benefits, but we still need to trim costs.”
Cole said he's been very impressed with the values of the investment group with whom he's working. “When you talk with global financial institutions, hedge funds and investment groups, you run into all kinds of people, not all of whom you would want to live next door to.
“But this is the kind of company I want to partner with — one that believes it's important to keep its word, not to screw someone, and one that's interested in taking care of the corporation and its employees, which is not always the case in today's business environment.”
Cole also expressed disgust with the bankruptcy process.
“It's a very, very expensive and troubling process,” he told SN, “very much like a feeding frenzy among a bunch of jackals fighting over a carcass.
“When a company files for bankruptcy, it becomes a very lucrative game for this industry of service providers that want to be sure they each get a bite before the carcass is completely destroyed, and it's no surprise to me why a lot of companies don't make it out of bankruptcy. It's like refereed chaos.”
Cole said the process can cost up to $700,000 a month in professional service fees.