A&P earlier this month announced that it has extended the deadline for bid submissions for its stores in connection with its July 19 Chapter 11 bankruptcy filing. In a filing with the federal bankruptcy court in White Plains, NY, A&P set a new deadline of September 17. The previous deadline had been on September 11 with the auction originally scheduled for September 24 and 25 at the law offices of Weil Gotshal & Manges LLP in Manhattan. That auction will now be held on October 1 and 2. With the revised deadlines, A&P said it would announce successful bidders on October 3. As such, the deadline for parties to file objections to successful bids was pushed back to October 9. Response to objections has been changed from October 6 to October 15 with the final sales hearing declaring the winning bids now to be held on October 16.
A&P cited several reasons for the delay including the visit of Pope Francis to Manhattan.
In other A&P bankruptcy news, the beleaguered grocery chain has asked the bankruptcy court for permission to reject all existing union contracts and allow its final labor proposal to be implemented. In a filing, the retailer said that current provisions of existing collective bargaining agreements would adversely impact its ability to sell its stores and would lead to the company going out of business. It is also looking to cancel its previously agreed upon promise to pay retirement benefits for 2,100 former associates.
“Certain non-economic rights such as work rules, rights of first refusal, and notice requirements are unnecessary or unworkable in the context of these cases and risk delaying and confusing the debtors’ asset sale process,” A&P said in a motion filed in with the court. “Finally, the debtors require relief from certain economic terms of the CBAs because the debtors are at risk of administrative insolvency.”
A&P is also seeking to extricate itself from all contingency language including bumping rights,  lump-sum retirement payments as well as the unions’ right to strike in the event the company fails to make pension payments.
Earlier this month, U.S. Bankruptcy Judge Robert Drain ruled that A&P could restrict seniority bumping rights, but only at the 25 stores the Tea Company is scheduled to close by mid-October. At presstime, no ruling has been made about bumping rights for associates at the remaining 271 stores.
As reported earlier, three companies – Acme/Cerberus (76 stores- $256 million), Ahold USA/Stop & Shop (25 stores – $146 million) and Key Food (17 stores at approximately $25 million) – have agreed to acquire a combined 118 stores. If those “stalking horse” bids hold up at the auction, that would be good news for about 12,500 UFCW members who are employed at those individual stores. However, there are no such assurances for the remaining 178 stores (including the 25 stores that A&P said it will close). UFCW attorneys emphasized to the bankruptcy court that after the Tea Company emerged from its original Chapter 11 in 2012, UFCW members agreed to substantial wage and benefit reductions ($625 million over five years). A&P in turn agreed to a clause in the union contract that said the company would require any future buyer to assume the labor contracts and hire substantially all employees.
Judge Drain also approved up to $3.9 million in retention pay to staff with the contingency that $1.1 million be added to the severance fund for union and non-union workers not included in the retention bonus plan.
A&P had originally asked the court for $5 million in retention bonuses for key employees. It ultimately reduced the request to $3.9 million. Judge Drain said he would approve the retention pay only if the $1.1 million cut from the original plan went to bolster severance payments. That $1.1 million severance payment will be divided among 468 employees, provided they stay until the store sales are completed.
A&P officials said it was urgent that those key employees continue working in the next month to three months, so that the company can close 25 stores and sell its other 271 units.
“This company is operating in extremus,” A&P lawyer Ray Schrock said. “We’re in a critical stage in the sales process.”
Earlier this month, U.S. Bank trustee Brian Masumoto objected to the plan, saying that some of the employees who qualify for the incentive plan could be considered “insiders,” citing 10 employees who earn $200,000 to $300,000. But A&P’s representatives said none of those employees are part of the senior management team and, according to a consultant, have salaries in line with industry standards.
With Masumoto’s statement possibly in mind, Judge Drain said he agreed an incentive plan may be warranted, but must also include workers who lose their jobs and aren’t eligible for incentive pay.
“I have an image in my head of 25,000 (A&P store associates) in a line,” Drain noted. “I’m being asked to poke each of them in the eye and I don’t think it’s good business judgment.”
While the $3.9 million incentive package doesn’t include any of A&P’s senior management members, it was recently revealed in court documents that the Montvale, NJ-based grocery chain had established a $6 million trust fund to provide compensation for its top executives three months before it filed for bankruptcy.
Judge Drain didn’t seem too pleased about the revelation, suggesting that executives in the trust consider contributing money toward the severance fund to prevent the trust fund from “further being investigated.”
Financial documents filed by A&P with the bankruptcy court indicate the retailer set aside $2.5 million in trust for one unnamed director and made two $1.5 million trust contributions for individuals identified only as “current officers.” At this point, A&P is not disclosing the identities of those senior executives who were included in the trust fund.
Below are the revised key dates concerning the disposition of A&P’s stores:
- September 17: All qualifying bids on the stores are due into the Bankruptcy Court
- October 1-2: Auction will be held for remaining unsold stores
- October 3: A&P said it would announce successful bidders
- October 9: Bidders and labor unions can file store sales’ objections in the Bankruptcy Court
- October 15: Response to objections
- October 16: Final sales hearing will be held
