The parent company
of Strack & Van Til--Central Grocers Inc. of Joliet, Ill.--has announced
that it’s filed for voluntary Chapter 11 bankruptcy relief.
The move comes two
days after three of company’s creditors--the Coca-Cola Company, General
Mills Inc., and Mars Financial Services--filed an involuntary Chapter 7
action against Central Grocers, alleging that the company “is generally not
paying its debts as they become due, unless they are the subject of a bona
fide dispute as to liability or amount,” according to the petition filed on
Tuesday in the U.S. Bankruptcy Court for the Northern District of Illinois.
The total amount
which those three companies claim Central Grocers owes them: $1,776,031.67.
In a statement
released this morning, Central Grocers said that it’s filed for Chapter 11
in the U.S. Bankruptcy Court for the District of Delaware, and that the
company “has been cooperating with its lenders and expects to have access to
sufficient liquidity to continue operating its stores and winding down the
distribution center in an orderly fashion.
company said, “All 22 Strack & Van Til, Town & Country, and Ultra Foods
stores in Indiana and Illinois are open and serving customers. Employees are
receiving their full pay in the ordinary course. Strack & Van Til intends to
pay vendors in full for goods and services provided on or after the filing
date, May 4, 2017.”
“Our stores are
open,” said Strack & Van Til President and CEO Jeff Strack. “And we are
focused as ever on supporting our customers and providing the legendary
service that we are known for. As we move through this process, our
priorities, values, and commitments to our customers and our communities
will not change. We thank our loyal customers for their continued support,
and we thank our employees for their hard work and dedication.”
In April, Strack &
Van Til confirmed that Central Grocers was looking to sell most of its
Strack & Van Til holdings. Now Central Grocers is saying that those stores
are still on the block and that it “intends to use this court-supervised
process to conduct an orderly sale of its Strack & Van Til stores as going
concerns and anticipates entering into a sale agreement with a
stalking-horse bidder in the near future.”
stalking-horse agreement, a debtor company offers the stalking-horse bidder
certain protections prior to any auction of the debtors assets. The stalking
horse’s bid then becomes the starting, minimum bid of the auction. Should
the stalking horse subsequently be out-bid, the debtor company can pay
so-called “breakup fees” to the stalking horse as well as reimburse it all
expenses incurred to date.
Central Grocers did
not release the name of the possible stalking horse.
“In light of the
increasingly difficult environment for independent supermarkets and
retailers, we have been working tirelessly to achieve an outcome that is in
the best interests of our stakeholders,” Central Grocers President and CEO
Ken Nemeth said. “We are using this court-supervised sale process to provide
us the time and flexibility to conduct an orderly sale of the Strack & Van
In addition to its
Chapter 11 filing, Central Grocers said that it’s filed “a number of
customary motions seeking court authorization to continue to support its
operations during the court-supervised process, including the payment of
employee wages and benefits.”
Central Grocers is
also seeking the dismissal of the involuntary Chapter 7 filing in the U.S.
Bankruptcy Court for the Northern District of Illinois.
Shortly after news
broke of Central Grocers’ interest in selling the 22 Strack & Van Til
stores, Teamster Local 703 filed a suit seeking to block any sale, on the
ground that such a sale could violate its labor agreements covering 300
members at Central Grocers. Local 703 later dropped the suit, after
receiving “certain assurances from Central Grocers regarding a potential
transaction and receipt of certain confidential information that will allow
the Teamsters to better assess the transaction,” Local 703 said at the time.
Central Grocers is
the seventh largest retail cooperative in the country, supplying some 400
independent supermarkets in Chicagoland. It was originally incorporated in
1917 and is the exclusive distributor of Centralla Brand foods.
In December 2012,
Strack & Van Til purchased eight groceries owned by WiseWay Supermarkets,
including WiseWay’s Chesterton location at 1600 Pioneer Trail. Strack & Van
Til immediately undertook a major remodeling of the former WiseWay, which
opened in February 2005. That 60,000-square foot grocery nearly tripled the
space of the old WiseWay--formerly Costas Foods--located at Broadway and
Eighth Street in Chesterton.