Citing ‘Unsustainable’ Debt, Tops Friendly Market Files For Bankruptcy

Citing ‘Unsustainable’ Debt, Tops Friendly Market Files For Bankruptcy

Tops Friendly Market, a New York-based chain of grocery stores, has filed for Chapter 11 bankruptcy protection. As of Dec. 30, 2017, the supermarket had $1.18 billion in liabilities, with $977 million in assets, along with an “unsustainable” debt load, according to a court filing.

The supermarket chain is pursuing the financial restructuring in order to eliminate a “substantial portion of debt from the company’s balance sheet,” according to a company statement. As with many retail bankruptcies, Tops blamed challenging market conditions, such as falling food prices and excess competition, along with an inability to invest further capital into the business for its financial position. But Tops did what most companies have not done: specifically pointing at Amazon as the culprit.

The Amazon name drop is peculiar. While the e-Commerce giant surely made a splash with its Whole Foods acquisition, other competitors, namely Walmart, have made a bigger impact on brick-and-mortar grocery in recent years. In particular, regional grocers such as Tops have felt squeezed between deep discounters such as Aldi and Lidl at the low end and specialty chains such as Wegmans Food Markets and Trader Joe’s at the high end.

In the filing, Chief Restructuring Officer Michael Buenzow said the 2007 purchase of Tops by Morgan Stanley’s private equity arm and subsequent transactions saddled the company with its present debt. A group of Tops managers led a buyout of the grocer in 2013, purchasing ownership in the Tops holding company from Morgan Stanley.

The restructuring will have no impact on day-to-day operations. All 169 of its stores in New York, Pennsylvania and Vermont will remain open throughout the process.

Tops said it has lined up a combined $265 million of debtor-in-possession (DIP) financing to help operate during the reorganization process, and is in constructive talks with some bondholders.

The Chapter 11 filing coincides with the possibility of another grocery bankruptcy. BI-LO, the operator of the BI-LO and Winn-Dixie supermarket chains, is preparing for a potential third bankruptcy filing as soon as March, according to Bloomberg. The retailer is planning to shutter nearly 200 stores as part of the move — either before or after the filing. Like Tops Markets, Bi-Lo is saddled with debt from a private equity acquisition. In this case, Bi-Lo has more than $1 billion in debt following its 2005 buyout by Lone Star Funds.

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