Tops Markets, LLC, one of the most recognizable names among grocery chains in New York and nearby states, has just filed a petition for bankruptcy under Chapter 11. Tops, based in Williamsville, New York, operates 169 stores in upstate New York, Pennsylvania and Vermont. The company’s management expects to keep all of its stores open while it restructures its finances under the shelter of the Chapter 11 bankruptcy process.
Tops management said that a burdensome debt load that it inherited from prior ownership is preventing it from restructuring its debts in the ordinary course of business. Current management bought the company from Morgan Stanley’s private equity firm six years after Morgan Stanly purchased the company from a Dutch retailer. The company’s current balance sheet shows $977 million in assets and $1.18 billion in liabilities. The company has arranged $265 million of debtor-in-possession financing to sustain its operations until the bankruptcy process is complete.
Tops management also cited other factors as driving its decision to seek Chapter 11. Many supermarket chains are having difficulty competing with big-box retailers, membership clubs and warehouses and online retailers. While supermarket chains are experiencing falling revenues and profit margins, these competitors are expanding their food operations and undercutting traditional supermarkets. In addition, a heavily unionized workforce and changing customer tastes are limiting the company’s ability to compete.
The competitive and financial difficulties that drove Tops into Chapter 11 are not unique. Even smaller businesses face increasing competition in the digital age. Any business person who owns or is involved in an enterprise that is facing a stifling amount of debt or lacks capital to modernize its operations may wish to discuss the matter with an experienced bankruptcy lawyer. An attorney can help clients understand how bankruptcy might provide enough breathing room to enable them to regain their financial health.
Source: Reuters, “NY supermarket chain Tops files bankruptcy, cites debt and Amazon,” Feb. 21, 2018