Another grocery chain has decided to seek protection from creditors by filing a Chapter 11 petition. Seasons Kosher Supermarkets, based in Flushing, N.Y., filed its petition in the Eastern District of New York on September 16. An announcement by the company that accompanied the filing indicates that the chain is attempting to arrange interim financing that will allow it to remain in business during the Chapter 11 proceeding.
The chain began operations in Queens in 2011. Since then, it has added stores in Manhattan, Scarsdale, Baltimore and New Jersey. It is currently attempting to open another store in Cleveland, but the bankruptcy filing is likely to delay the opening of that store. In its bankruptcy petition, the company stated that it had liabilities of approximately $42 million and assets of approximately $31 million. Its operating revenues to date for 2018 come to about $63 million.
Company officers said that the chain has secured a commitment for $6 million in private funding that will enable it to meet vendor obligations, fully stock the shelves of its stores and maintain normal operations while it restructures its debts. The company’s original stores experienced higher-than-expected sales and were able to operate profitably. Unfortunately, the complications and delays associated with building additional stores drained its cash flow. A company spokesperson said that several additional parties are interested in investing in the company and that it expects that its Chapter 11 reorganization will be relatively short.
Whether Seasons will be able to complete its refinancing and return to profitable operation remains to be seen. Nevertheless, the company’s decisions to continue operations while it looks for interim financing demonstrates that bankruptcy is not always the end of a commercial business. In this case, Chapter 11 may be the key to rejuvenation of the business. Any business that is suffering from financial distress may wish to consult an experienced bankruptcy attorney for advice on the risks and advantages of Chapter 11 and whether such a proceeding can breathe new life into the enterprise.