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NEW YORK — The parent company of Fairway Market has filed a “prepackaged” Chapter 11 plan under which creditors will swap existing debt for new equity and debt in a reorganized company.
The supermarketer, which has been weighed down by a heavy debt load and fierce competition in the greater New York market, filed for bankruptcy protection after a fruitless search for a buyer or significant new investment. Competitors pressuring the chain include Whole Foods Market Inc. and Trader Joe’s Co.
The plan proposes that current lenders provide Fairway Group Holdings Corp. $55 million in debtor-in-possession and exit financing.
The filing will not affect customers, suppliers or employees, the company said. It will continue to operate 15 grocery stores and four wine and spirits stores in New York, New Jersey and Connecticut. Manhattan residents can also shop Fairway online.
“We believe that implementing this prepackaged plan is the best opportunity for Fairway to restructure its balance sheet on an expedited basis, strengthen its operations, retain jobs and create long-term value, while continuing to provide customers with the best food experience in the greater New York area,” said Fairway Group chief executive officer Jack Murphy. “Over 80 years ago, Fairway started as a fresh fruit and veggie stand at the corner of 74th and Broadway. It grew into the greatest food store in the country. Fairway is famous for apples stacked to the ceiling, olives straight from Italy, New York-style bagels, hand-sliced smoked salmon, prime beef and specialty imports. Nobody slices a fish or boils a bagel like us. Nobody.”
The retailer said that the debtor-in-possession facility would allow for holders of general unsecured claims, including suppliers, employees, unions and other trade creditors, to get full payment for existing obligations in the ordinary course of business. The five collective bargaining agreements between Fairway and unions will remain in effect, and store leases would be assumed. Fairway’s management would remain intact.
The chain said its stock would be canceled, with no compensation for shareholders. Following emergence from bankruptcy it would operate as a private company.
In a disclosure statement filed in U.S. Bankruptcy Court, the company said the reorganization would “right-size its debt and set Fairway on a path to emerge from bankruptcy as a leaner, healthier enterprise that is positioned to thrive and grow its iconic New York City brand.”
In an open letter to vendors, Murphy emphasized that debts would be paid, and urged support. “As we work together to manage through this, I want to be very clear that Fairway is open for business, and we expect to continue normal operations throughout this process,” he wrote.
