Grocery Chain A&P Exits Bankruptcy Court Protection

March 26, 2012

By: Brenna Working

Less than two years after filing for Chapter 11 bankruptcy protection, grocery chain A&P has officially exited the court’s protection. Bloomberg News reports that the company will continue operating as an independent grocery chain, with stores branded as A&P, Food Emporium and Pathmark.

The grocery giant, which began business in 1859 as the Great Atlantic & Pacific Tea Company, sought bankruptcy in December 2010. Since entering the court’s protection, A&P has reportedly made several changes, including renegotiating agreements with suppliers, modifying the collective bargaining rights of its employees, building a new management team, and redesigning many of its stores.

The company’s exit from bankruptcy court was facilitated in part by $645 million in financing from Credit Suisse and JPMorgan Chase & Co. The money will help the company as it continues to operate stores and make payments on $490 million of debt that remains.

While some news outlets have reported that fewer businesses that seek bankruptcy protection are able to emerge as operational entities since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, A&P will keep its 320 stores open, which means its roughly 34,000 employees will be able to keep their jobs.

Union Negotiations Common in Large Bankruptcies

Vallejo, California, which filed for bankruptcy in 2008 and exited just a few months ago, had similar financial problems to those that A&P encountered, even though the two entities are vastly different.

Both found that putting unionized employee benefits on the table for bankruptcy negotiations helped them to shed the debts they had acquired and emerge without the same crippling level of financial obligations that sent them to bankruptcy court in the first place.

It is unclear at present how such moves will affect unionized employees in the long term, but it does seem apparent that the issue will not go away in the near future. After Wisconsin’s governor sparked massive protests last year with his anti-union legislation, the issue found its way into the national spotlight.

As the 2012 Republican primary drags on, the issue remains on the table in many states.

A&P headquarters are located in Montvale, New Jersey, and was the United States’ first chain of grocery stores. After operating 16,000 stores in the 1930s, A&P began to fall from prominence, as other chains implemented more modern supermarket amenities.