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A&P files for bankruptcy, plans to close five LI stores

Supermarket operator Great Atlantic & Pacific Tea Co.,

Supermarket operator Great Atlantic & Pacific Tea Co., which owns Pathmark, has filed for Chapter 11 bankruptcy for a second time. Credit: Getty Images

Supermarket operator Great Atlantic & Pacific Tea Co. has filed for Chapter 11 bankruptcy and said it would close five stores on Long Island and sell others.

The late Sunday bankruptcy filing, which allows the company to continue operating, comes three years after the company previously emerged from court protections.

A&P announced it will close 25 stores in all, including Pathmarks in Baldwin and Centereach, and Waldbaum's in Carle Place, Oceanside and Riverhead. The stores will close in the next few months but will remain fully stocked until then, the company said.

A&P has agreed to sell 120 of its stores for about $600 million to Acme Markets Inc., Stop & Shop Supermarket Co. and Key Food Stores Co-operative Inc., A&P said in a statement Monday. The stores to be sold employ 12,500 people.

"A sale process implemented through Chapter 11 is the best way for A&P to preserve as many jobs as possible, and maximize value for all stakeholders," A&P president and CEO Paul Hertz said in a statement.

Stop & Shop said Monday it has agreed to acquire 25 A&P stores in New York and New Jersey for $146 million. The stores include Waldbaum's locations in East Hampton, Southampton, Baldwin, Massapequa, Long Beach and Huntington, and Pathmarks in Greenvale, Seaford and Franklin Square. The deal is subject to bankruptcy court approval.

Bethpage-based supermarket chain King Kullen also plans to bid for some stores.

"While it's unfortunate that Waldbaum's and Pathmark will be closing and selling stores in Nassau and Suffolk counties, King Kullen stands ready to explore every opportunity that allows us to grow," King Kullen co-president Brian Cullen said.

A&P, based in Montvale, New Jersey, was founded in 1859 and operates nearly 300 stores under the banners of A&P, Food Emporium, Super Fresh and Food Basics, as well as 33 Waldbaum's and 19 Pathmarks on Long Island. More than 90 percent of about 28,500 employees are represented by one of 12 local unions.

Acme, Stop & Shop and Key Food conditioned their purchases on being "free and clear" of all union bargaining agreements, according to the filing. The bidders also contemplate negotiating with the unions.

In response to the bankruptcy filing, the United Food and Commercial Workers International Union, representing more than 30,000 A&P workers, said: "The UFCW and UFCW local unions will work hard to ensure that the process for selling stores protects our members' jobs, working conditions, and benefits."

In its Manhattan bankruptcy filing, the company reported total assets of about $1.6 billion and total liabilities of about $2.3 billion, as of Feb. 28. Among the largest unsecured creditors listed was C&S Wholesale Grocers with a claim of $39.4 million. On Long Island, waste management firm Universal Environmental Consulting Inc. in Westbury is owed $538,379; East Yaphank-based beer distributor Clare Rose Inc. is owed $419,543.

Walter Yakaboski, 59, of Middle Island, a baker for 27 years who works at Waldbaum's in Rocky Point, said in the last contract, union workers gave back benefits and have not received any raises for five years.

"This was all to keep the company afloat. Now, it seems like they squandered the opportunity to have a great business," Yakaboski said.

A&P is blaming its failure to turn around the business on competition, such as Whole Foods Market Inc. and Trader Joe's Co. It also said it erred in keeping 50 to 60 underperforming stores open and not successfully reducing its pension obligations and other costs in the first bankruptcy.

A&P previously filed for bankruptcy in 2010, emerging in 2012 as a closely held company owned in part by Ron Burkle's Yucaipa Cos.

Under Chapter 11, the company can reorganize its operations, break leases without major penalties, and potentially terminate union contracts, said Chuck Tatelbaum, partner at Ft. Lauderdale-based law firm Tripp Scott.

"We call this a 'Chapter 22,' " said Tatelbaum, adding supermarkets traditionally have a 2 percent profit margin. "It is Chapter 11 the first time, and a Chapter 22 the second time. We have seen a lot of 22's because the companies go through the first bankruptcy and the plan is way too aggressive to pay off debts, but it is not realistic."

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