An inability to realize synergies related to its 2006 acquisition of White Rose, along with “fierce” competition besetting its cooperative and voluntary wholesaling units, triggered significant financial challenges for Associated Wholesalers Inc., the distributor said in its Chapter 11 bankruptcy filing Tuesday.
AWI said it made the filing in order to facilitate an orderly sale and obtain debtor-in-possession financing that would allow it to continue operating while a court-led auction proceeds. The company in a filing said it had defaulted on bank loans this year and required DIP financing to avoid a “free-fall” bankruptcy and liquidation.
C&S Wholesale Grocers has made an offer to buy AWI and its offer was determined to be the “stalking horse” bid for the company. C&S is also participating in the DIP financing for AWI.
C&S’s offer is for the lesser of AWI’s bank debt — at least $132 million, according to AWI — or $152 million, along with adjustments for various additional debts. AWI said it has around $72 million in trade debts. Its largest unsecured creditors are Western Family Foods (owed $4.5 million), Tyson ($2.9 million), Kellogg’s ($2.7 million) and General Mills ($2.4 million).
C&S was one of three companies that expressed interest in purchasing AWI during an evaluation by Lazard Middle Market earlier this year. A previous attempt to sell only White Rose did not generate sufficient interest, AWI said.
AWI said its revenues have held steady near $2.2 billion in the fiscal years ended Aug. 31 of 2011, 2012 and 2013, split evenly between its cooperative and White Rose divisions. But profits at both divisions have fallen in each year over the same period, with coop profits sinking to $19 million last year and White Rose showing a $2.6 million loss.
AWI is owned by 500 retailer-owners and distributes to more than 800 supermarkets, specialty stores and convenience stores in seven states. It operates distribution centers in Robesonia, Pa., and in York, Pa. White Rose distributes to 495 customers in the greater New York area through warehouses in Carteret, N.J., including retailers Fairway, Pioneer and Met Food.
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