Fairway Market has filed for Chapter 11 bankruptcy protection and Thursday announced a plan to sell up to five of its stores and find buyers for the rest, a day after the grocery chain disputed media claims that it planned to liquidate and close all 14 of its stores.
It was Fairway's second Chapter 11 filing in less than four years.
In its Thursday court filing, Manhattan-based Fairway Group Holdings Corp. said it has entered into a so-called "stalking horse" agreement to sell up to five of its New York City stores and a distribution center to Village Super Market Inc. for about $70 million. A stalking horse agreement represents an opening bid; other entities may offer higher prices for the assets.
Fairway said it “will execute a court-supervised sale process to continue to negotiate for the sale of its remaining store locations,” including its two Long Island stores, in Plainview and Westbury.
As of November, the company had assets totaling approximately $158.9 million and liabilities totaling approximately $288.7 million, it said in the court filing.
“We would like to extend gratitude to our employees, vendors, distributors and customers for their support, dedication and loyalty over the years. … After careful consideration of all alternatives, we have concluded that a court-supervised sale process is the best way to meet our objectives of preserving as many jobs as possible, maximizing value for our stakeholders, and positioning Fairway for long term success under new ownership,” Abel Porter, Fairway’s chief executive officer, said in a statement Thursday.
Based in Springfield township, New Jersey, Village Super Market operates 30 supermarkets under the ShopRite name in New Jersey, Maryland, New York City and eastern Pennsylvania and three specialty markets under the Gourmet Garage name in New York City.
Fairway was founded in 1933 and has stores in Connecticut, New Jersey and New York.
The Plainview store opened in 2001 in Manetto Hill Plaza, said Jennifer Maisch, spokeswoman for Kimco Realty Corp., the New Hyde Park-based owner of the shopping center. At 55,162 square feet, Fairway Market is the largest tenant in Manetto Hill Plaza, according to Kimco’s website.
Fairway Market's Westbury store opened in Raceway Plaza in 2012 and occupies about 60,000 square feet, said Aaron Fleishaker, executive vice president of real estate for The Mattone Group, the Queens-based co-owner and manager of the shopping center.
On Tuesday, the New York Post reported that Fairway planned to file for Chapter 7 bankruptcy, which is a liquidation bankruptcy.
Fairway denied the Post’s report Wednesday, saying “Fairway has been engaged in a strategic process and expects to soon announce a value maximizing transaction that will provide for the ongoing operations of stores.”
The court filing lists 11 companies that have ownership interest in Fairway, with Brigade Capital Management, based in Manhattan, owning the largest share, 33.628 percent, followed by Goldman Sachs Special Situations Group in Manhattan, with 29.946 percent, and FS KKR Capital Corp. in Philadelphia, 22.147 percent.
In May 2016, Fairway filed for Chapter 11 bankruptcy protection after reaching a restructuring deal with creditors.
A Chapter 11 filing allows a company to reorganize, although this time Fairway is trying to sell all its assets.
“Chapter 11 affords the debtor much greater control over the process. In particular, in a Chapter 11, the existing management of a company stays in possession of the company,” said Steven B. Smith, a partner in the Manhattan law firm of Herrick, Feinstein LLP, who focuses his practice on complex corporate restructuring, liquidations and bankruptcy litigation. He is not involved in the Fairway bankruptcy.
In court filings Porter, the Fairway CEO, cited several reasons for Fairway’s financial issues, including increased competition from stores that sell groceries, such as drugstores and dollar stores, and large online retailers, such as Amazon and Target. Also, national retailers benefit from better economies of scale than does Fairway, which is a regional chain, Porter wrote.
Fairway has about 3,000 employees, about 83 percent of whom are unionized, the filing said.
“The workforces of some of the company’s most significant competitors are not unionized, resulting in lower labor, pension, and benefit costs than the company faces,” Porter wrote.