Marsh files Chapter 11

CEO: Action “preserves value” as it seeks sale

Marsh Supermarkets, a one-time icon of the supermarket industry, on Thursday said it had filed for protection under Chapter 11 of the U.S. Bankruptcy code, saying the move would help the struggling company preserve its value as it seeks a buyer.

The move comes after the company indicated earlier this week it would close all of its stores within 60 days if unable to find a buyer. Initially this was reported by SN and other outlets as a threat to close 19 of its 44 remaining stores — the company’s letter to state officials in Indiana covered only those outlets meeting employment thresholds required by the federal WARN act.

A company spokesman, however, told the Indianapolis Business Journal that all stores were under the same 60-day deadline. Marsh is in the process of closing 16 stores currently. 

The company in filings said it would seek a court-led auction of its assets. Marsh said its advisors had entered into confidentiality agreements with 35 parties and that five of them expressed interest in various groups of stores representing "nearly all" of its 44 core stores. Despite this interest, going concern buyers have not yet emerged.

Sources said Thursday that some vendors had already tightened supply in anticipation of financial crisis.

Marsh noted, however, the filing triggers an automatic stay, which precludes the company from paying amounts owed for pre-petition goods and services without a court order.

"While today's decision was extremely difficult, we believe this action is necessary to preserve the value of the business as we seek a sale," CEO Tom O'Boyle said in a statement. "After reviewing every alternative, we concluded that Chapter 11 clearly provides the most effective and efficient means to ensure the best recovery for the company's stakeholders."

Marsh has retained Peter J. Solomon Co. as its investment bank to market its assets.

The Chapter 11 filing permits daily operations to continue without interruption. The stores will remain open and serving customers, employees will continue to receive their usual salary and benefits, and goods and services purchased by the company, after the May 11, 2017 filing date, will be paid for in the ordinary course of business.

Marsh, which filed in Wilmington, Del., federal court, has asked for permission to use its available cash to fund operations during this period. Marsh said it expects to have sufficient liquidity to fund operations throughout the sale process.

Marsh also has sought approval to pay its employees and provide benefits as normal, to continue customer programs as normal and to continue the closing store sales at select locations.

Marsh Supermarkets was founded in Muncie, Ind., in 1931 by Ermal Marsh. Known as a leader in technology and other innovations, Marsh is noted as the first U.S. grocery chain to ring up purchases with electronic scanners and the first to adopt a system that wirelessly delivers coupons to customers' smartphones as they shop.

The Marsh family sold the company — then at 120 stores — to Sun Capital Partners in 2006 but has encountered additional struggles since.

In a release, Marsh said larger national and regional chains have made the Indiana and Ohio grocery marketplace among the nations most competitive. The crowded environment has led to price-cutting and other forms of promotional activity that have put profit margins under extreme pressure.

Marsh has reacted this year by closing 21 unprofitable stores and, in late April, sold its in-store pharmacy business to Hook-SupeRx, L.L.C., a subsidiary of CVS Pharmacy.

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