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Kings Food Markets' owner files for bankruptcy, cites costs of pensions, wages

The parent company of Kings Food Market in

The parent company of Kings Food Market in Garden City, seen here, has filed for bankruptcy. Credit: Chris Ware

The owner of Kings Food Market in Garden City has filed for bankruptcy protection, citing increased competition from large grocery chains and unionized employees' wage and benefit costs among the reasons.

Parsippany, New Jersey-based KB US Holdings Inc., owner of 35 East Coast stores — 25 Kings Food Markets and 10 Balducci's Food Lover's Markets — filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York on Sunday.  The Garden City store is its only Long Island location.

Manhattan investment firm TLI Bedrock has submitted a "stalking horse,"  or starting bid, of $75 million to buy the company, including 30 of the stores, according to a court filing.

Like most grocery stores, high-end retailer Kings and specialty gourmet chain Balducci’s have benefited from increased foot traffic  throughout the COVID-19 pandemic.

“Our sales and service have never been stronger; we are confident we will emerge from this process without missing a beat, well-positioned for future stability and success,” KB chief executive officer Judith Spires  said in a statement Sunday.

KB and TLI Bedrock signed a stalking horse asset purchase agreement July 13 that is subject to court approval.

A stalking horse bid “is a binding agreement between the buyer and the seller but it is subject to higher and better offers,” said Patrick T. Collins, an attorney at Farrell Fritz, P.C. in Uniondale who focuses on bankruptcies and restructuring. He is not involved in KB’s bankruptcy proceedings.

KB asked the court to approve a schedule that sets Oct. 2 as the deadline for other bids to be submitted, Oct. 8 for an auction if a better bid than TLI’s is received and Oct. 22 as the date for a hearing to approve the sale. 

No final plans have been made about which stores TLI will buy or what will happen to the remaining five stores, if the court approves the bid, KB spokeswoman Kimberly Yorio said.

The Kings store at 870 Franklin Ave. in Garden City opened in 2000 and occupies 11,500 square feet, said Thomas J. McCambridge, vice president of commercial leasing at The Albanese Organization, the Garden City-based real estate firm that owns the store building.

KB employs more than 2,900 people, including 70 at the Garden City store.

The company had assets of about $194 million and liabilities of about $200 million as of July 25, according to a bankruptcy court filing.

The company cited several reasons for the bankruptcy, including competition from large grocery chains and KB's historically low earnings that strained the company’s cash flow and prevented it from making store and technology upgrades. 

KB also cited wages and pension  costs as a reason for its challenges.

Sixty-six percent of Kings' workers  are unionized, while “some of KB’s most significant competitors have nonunion workforces, resulting in lower labor, pension, and benefit costs than KB faces,” according to the court filing.

Two of the pension funds for union employees are underfunded, including one with the United Food and Commercial Workers International Union Local 1500 in Westbury, according to the filing.

Local 1500, which represents deli staff, produce workers and cashiers at the Garden City store, did not respond to a request for comment.

KB and TLI had planned to conduct the company sale outside of bankruptcy, according to the bankruptcy filing. The deal is subject to KB being able to transfer its assets to the buyer free of liabilities, including those related to the pension contributions, but the company and union could not reach an agreement, according to the court filing. 

So, KB filed a bankruptcy case as a way of forcing a resolution with a union, Collins said.

“Under bankruptcy code, there is a statutory process to require the company and union to negotiate with each other. And if the court determines that the company has made a proposal that is necessary to survive and the union turns the proposal down without just cause, then the court can authorize the debtor to reject the collective bargaining agreement,” Collins said.

Kings, founded in 1936, has 25 stores in New Jersey, New York and Connecticut.

Balducci’s, founded as a fruit and vegetable stand in Brooklyn in 1915 and bought by Kings in 2009, has 10 stores in Connecticut, Maryland, New York and Virginia.

An affiliate of GSSG Capital, which is a private holding company in the Middle East nation of Qatar, KB bought both Kings and Balducci’s from New York-based private equity firms Angelo, Gordon & Co. and MTN Capital Partners LLC in 2016.

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