Two supermarket chains in the U.S. are readying filings for bankruptcy said sources with knowledge of this matter, another sign of mounting pressures across the grocery industry.
The owner of Winn-Dixie supermarket Bi-Lo LLC is said to be preparing bankruptcy filing for as early as March, said the people close to the situation, who requested anonymity due to the process not being released to the public.
Tops Friendly Markets owner could possibly seek protection from bankruptcy court from its creditors this month, said people close to the matter.
With a great deal of competition and low margins, the grocery business has never been easy. However, now the industry must contend with hard push by the big-box retailers as well as by Amazon, which last year acquired Whole Foods Markets as it seeks a larger presence of brick and mortar locations.
That move threatened to force the older chains into consolidating or changing over much of their current operations.
Bi-Lo, in part due to the upheaval, plans to shut close to 200 locations, either prior to or after filing for bankruptcy protection, said one source. The business, which in previous incarnations went bankrupt during 2005 as well as 2009, might still find a way in which to restructure its current debt load outside of court.
However, Bi-Lo continues to labor under debt of over $1 billion following its buyout in 2005 by Lone Star Funds. The business and creditors it has have held discussions to talk about the possibility of a swap of debt-to-equity, and other alternative like asset sales.
Tops was originally founded by Ferrante Castellani an immigrant from Italy who close to one century ago opened his first location in Niagara Fall. The chain, based in Williamsville, New York operates approximately 170 stores with over 14,000 employees across the Northeast.
Buyouts first by Morgan Stanley followed by the own managers of the company, left Tops struggling under a heavy debt load, and the intense competition in the industry made it difficult to offset such a burden through hiking prices.
It was hit hard by another blow when the federal government cut subsidies for foot-stamps, whose users contribute close to 10% of the company’s revenue each year. Since then, more reductions have been contemplated by the White House.
With Bi-Lo, Lone Star injected $150 million when it exited bankruptcy for the first time, while investing another $275 million helping it in 2013 to acquire Winn Dixie.