On Monday, Fresh & Easy Neighborhood Market (“Fresh & Easy”) filed chapter 11 petitions for bankruptcy in the United States Bankruptcy for the District of Delaware. Fresh & Easy is a grocery chain with stores in California, Nevada and Arizona. See Fresh & Easy’s Declaration in Support of First Day Motions and Applications (the “Declaration” or “Decl.”) at * 2. Founded in 2006, Fresh & Easy experienced rapid growth, opening 200 stores by 2012. The company describes its grocery business as “offering healthy and wholesome foods, including prepared foods at affordable prices.” Id.
Fresh & Easy operates multiple types of retail stores. Its largest stores are approximately 10,000 square feet, while its second largest stores are generally 7,000 in size. These “large footprint” stores are intended to provide shoppers with a one-stop location for weekly shopping. In addition to the large retail stores, Fresh & Easy also operates 3,000 square foot “market concept” stores which offer more convenience-based shopping and fresh meal products. Decl. at *3. The company currently operates 167 store locations, some of which are owned outright by Fresh & Easy while the others are operate through ground or store leases.
Besides retail locations, Fresh & Easy also operates production facilities in Riverside, California. The company’s Riverside location includes meat and produce facilities and a distribution center. Decl. at *3. Fresh & Easy previously operated a second distribution facility in Stockton, California. The second distribution center, however, is currently inactive. Decl. at *3.
Events Leading to Bankruptcy
Fresh & Easy began as wholly owned subsidiary of Tesco PLC (“Tesco”). Decl. at *2. In the first two years of operating Fresh & Easy, Tesco invested over $610 million to develop the Fresh & Easy business. Decl. at *5. The company’s business model was initially successful, with annual sales reaching as high as $1.2 billion in 2012. Despite strong sales, Fresh & Easy has had to adjust to the challenges presented by the recession dating back to 2008. Id.
Fresh & Easy views many of its store leases as “above market relative to its competitors.” Decl. at *5. The recession has had considerable impact on the real estate market in California, Arizona and Nevada – the three states where Fresh & Easy operates. Even though the company has reached annualizes sales in excess of $1 billion, it has operated at annual net operating losses each year since 2006. Decl. at *5. For its fiscal year ending in February of 2013, Fresh & Easy experienced average losses of $22 million per month. Decl. at *5.
Objectives in Bankruptcy
In December of 2012, Fresh & Easy and Tesco began looking for a buyer. The company developed a list of 65 potential buyers and solicited interested parties in purchasing Fresh & Easy as a going concern. Decl. at*6. By April 2013, the company had narrowed the list of potential buyers down to three. Further negotiations narrowed the list down to one buyer – an affiliate of The Yucaipa Companies, LLC (“Yucaipa”). After further negotiations with Yucaipa, the parties entered into a Stalking Horse Asset Purchase Agreement (the “APA”) wherein the buyer will serve as a stalking horse bidder for the sale of substantially all of Fresh & Easy’s assets under pursuant to section 363 of the Bankruptcy Code.
The Fresh & Easy bankruptcy is before the Honorable Kevin Carey of the United States Bankruptcy Court for the District of Delaware. Fresh & Easy is represented by the law firm Richards, Layton & Finger.