Unable To Pare Debt, Tops Seeks Chapter 11 Bankruptcy Protection

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Tops Friendly Markets LLC has filed for Chapter 11 bankruptcy protection as it seeks to reorganize in order to eliminate its substantial debt, according to court papers submitted by the Williamsville, NY-based regional chain. The filing was made in U.S. Bankruptcy Court in White Plains, NY on February 21. Judge Robert Drain (the same jurist who supervised A&P bankruptcy) will preside over the proceedings.

Tops stores in western and central New York, northern Pennsylvania and Vermont will remain open with no impact on day-to-day operations, the retailer noted. In court papers, Michael Buenzow, Tops’ chief restructuring officer, said the retailer’s 2007 acquisition by Morgan Stanley’s Private Equity unit (and subsequent 2013 sales to a group of current executives including CEO Frank Curci) “saddled the company with an unsustainable amount of debt on its balance sheet.” Morgan Stanley acquired Tops from Ahold USA.

In the filing, Tops noted that it has also been impacted by a claim from the Teamsters union that it owes $180 million in unfunded pension liabilities related to the 2010 purchase of Penn Traffic by Tops.

The company, which opened its first store in Niagara Falls, NY in 1962, has secured commitment for a $125 million debtor-in-possession (DIP) loan from noteholders and a $140 million DIP asset-based loan from Bank of America, which will support the company’s operations while the court-supervised financial restructure is under way, according to the announcement.

“Our operations are strong and we have an outstanding network of stores and a talented team to support them,” said Curci. “We are now undertaking a financial restructuring, through which we expect to substantially reduce our debt and achieve long-term financial flexibility. This will enable us to invest further in our stores, create an even more exceptional shopping experience for our customers and compete more effectively in today’s highly competitive and evolving market. Tops has built strong market share and our stores continue to distinguish themselves by offering quality products at affordable prices with superior customer service. We believe the financing that we received from our noteholders is a vote of confidence in our business.”

Tops currently owns 169 supermarkets, with five additional stores operated by franchisees under the Tops Friendly Markets banner. It employs more than 15,000 associates.

Revenue in 2017 revenue was approximately $2.5 billion and the regional merchant posted a net loss of about $80 million. It has assets of $977 million and liabilities of about $1.2 billion, according to court filings.