The parent company of the struggling New York grocery chain Fairway Market filed for bankruptcy on Monday, just three years after taking the company public, after an ambitious expansion plan failed to generate enough sales to pay down the company’s debt.
The grocery store chain has been a destination for gourmands in New York for decades, but it has faced increasing pressure in recent years from fresh-food rivals, like Whole Foods Market and Trader Joe’s. A leveraged buyout of the chain by a private equity firm led to an aggressive store-opening plan that vacuumed up cash and sent the stock company’s stock price plummeting.
In its statement and court filings, Fairway emphasized that it would execute a Chapter 11 restructuring plan “without interruption” to its business. Landlords, trade creditors and employees will be unaffected, the company said. As part of the plan, Fairway’s senior lenders will exchange debt for common equity and $84 million of debt in the reorganized company.
Nathan Glickberg started Fairway in the 1930s as a fruit and vegetable stand on the Upper West Side under the name 74th Street Market. In 1954, the company expanded into meat, cheese and dairy products, and then gradually into a wider variety of specialties. The company now operates 15 in locations in the greater New York City area, including four wine and spirits stores.
“Fairway is famous for apples stacked to the ceiling, olives straight from Italy, New York style bagels, hand sliced smoked salmon, prime beef and specialty imports,” Jack Murphy, Fairway’s chief executive, said in a statement on Monday. “Nobody slices a fish or boils a bagel like us. Nobody.”
In 2007, the company sold an 80 percent stake to Sterling Investment Partners, a private equity firm based in Westport, Conn., for $150 million, including $71 million that was added as debt on the company’s balance sheet. Under Sterling, and fed by new debt, the company expanded into new markets; stores opened in New Jersey, Connecticut and elsewhere.
That expansion plan became more aggressive after 2013, when the company had an initial public offering of stock, selling shares for $13.
But Fairway did not just face growing competition from Whole Foods and Trader Joe’s, which were opening new stores that catered to the same specialty tastes. Cheaper mass retailers — like dollar stores, drugstores and convenience stores — also ate into Fairway’s business, the company said in its bankruptcy filings.
Shares of Fairway’s stock plummeted. On Tuesday, the stock fell another 51 percent, to 10 cents a share.
For the 52-week period that ended April 3, same-store sales fell 6 percent, according to court filings.
At the beginning of last year, executives conducted an “extensive” process to try to sell the company or attract additional investment, according to its bankruptcy filings. With the help of the investment bank Greenhill & Company, Fairway contacted more than 60 potential suitors.
“Unfortunately, no acceptable proposals were put forward,” the company said. In February, Fairway warned that its failure to attract additional investors threatened its ability to continue operating.
For the nine months that ended Dec. 27, 2015, Fairway reported a net loss of $36 million. As of that date, the company listed assets of $346 million and liabilities of $397 million, according to court filings.
On Monday, the company said that its restructuring plan would help ease the burden of $279 million in loans and would “restore Fairway to long-term financial health.”
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