Central Grocers said Thursday that it voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code and that it would seek a court-led auction of its assets, including its warehouse and Strack & Van Til retail chain, and wind down its distribution business.
Earlier this week, several creditors of the cooperative wholesaler sought to retrieve trade debts by petitioning a bankruptcy court in Illinois for an involuntary Chapter 7 liquidation. Central filed its voluntary petition in Delaware court, and said Thursday it would seek to dismiss the Chapter 7 case.
“In light of the increasingly difficult environment for independent supermarkets and retailers, we have been working tirelessly to achieve an outcome that is in the best interests of our stakeholders,” Ken Nemeth, president and CEO of Central Grocers, said in a statement. “We are using this court-supervised sale process to provide us the time and flexibility to conduct an orderly sale of the Strack & Van Til stores, while we work to sell the warehouse in Joliet and wind down our wholesale distribution operations.”
Central said it anticipated entering into a sale agreement with a stalking horse bidder for its 22 remaining Strack & Van Til stores in the near future. Central is also seeking to sell its distribution center in Joliet, Ill.
Highland, Ind.-based Strack & Van Til was Central’s largest retail customer. Around 80% of Strack’s company’s Class A and Class B shares are owned by Central. CEO Jeff Strack and Andrew Raab, Vice President of Real Estate for Strack & Van Til, are each 10% owners of Strack & Van Til.
“Our stores are open, and we are as focused as ever on supporting our customers and providing the legendary service that we are known for,” Jeff Strack said in a statement. “As we move through this process, our priorities, values and commitments to our customers and our communities will not change. We thank our loyal customers for their continued support, and we thank our employees for their hard work and dedication.”
Central’s Class A and Class B equity shares are distributed among dozens of independent food retailers. No single entity owns more than 10% of Class A stock; Walt’s Food Center, S. Holland, Ill. owns nearly 13% of Central’s Class B shares. Save More Foods, Gary, Ind., Wiseway Foods, Merrilville, Ill., and Sunset Food Mart are also significant Class B shareholders.
Other retailers with a significant ownership stake in Central include Treasure Island, Chicago; Sullivan’s, Savanna, Ill.; Fairplay Finer Foods, Chicago; Berkot’s Super Foods, Mokena, Ill.; Tony’s Finer Foods, Chicago; Pete’s Fresh Market, Chicago; Carnicerias Jimenez, Chicago; and La Chiquita Foods, Chicago.
According to its website Central served around 400 retail members, and had 2016 sales of $1.9 billion, according to SN’s Top 75. Around 38% of Central’s total sales were retail sales.
Central said it has been cooperating with its lenders and expected to have access to sufficient liquidity to continue operating its stores and winding down the distribution center in an orderly fashion. Its Strack & Van Til stores remain open for business.
According to the petition, Kellogg’s Sales Co. is Central’s largest unsecured creditor with a $3 million claim, followed by Kraft Foods, Nestle USA, Tyson Foods, General Mills Finance, Deans Foods, Unilever Foods, Dr Pepper7Up and Conagra Foods.
Central has filed a number of customary motions seeking court authorization to continue to support its operations during the court-supervised process, including payment of employee wages and benefits.
Weil, Gotshal & Manges is serving as legal counsel to Central Grocers. Peter J. Solomon Co. is serving as its financial advisor, and Conway MacKenzie has been retailed as the chief restructuring officer.