Bankruptcy Roundup: A&P, Oil & Gas

For the second time in five years, A&P has filed for bankruptcy. This time, it appears unlikely the company will reorganize and continue doing business, as sales of its remaining grocery stores continue. A&P, once the once largest grocery chain in the United States, did not improve its business model enough during its bankruptcy reorganization early this decade to compete with the buying power and aggressive pricing of larger competitors Wal-Mart and Target.

“I think the biggest problem is the competition,” said Bruce Nathan, Esq., of Lowenstein Sandler LLP. “What it comes down to primarily is that they were not growing and just couldn’t compete with the ‘Big Box’ stores.”

Meanwhile, at least three more energy companies have filed for Chapter 11 due to the oil market bust. Two of the firms hail from Houston.

Milagro Oil & Gas Inc. filed on July 15 in the U.S. Bankruptcy Court in the District of Delaware. It lists 30 creditors and estimates assets between $1 million and $10 million with liabilities between $500 million and $1 billion. Milagro's plans include selling assets to Houston-based White Oak Resources VI LLC for $120 million in cash and $97 million in equity, according to news reports.

Also on July 15, Houston-based Sabine Oil & Gas Corporation filed in the U.S. Bankruptcy Court for the Southern District of New York. “We remain committed to maintaining operational excellence and executing within our current strategy–and importantly, we fully expect to continue operating in the ordinary course,” said David Sambrooks, president and CEO. “We intend to emerge with increased financial flexibility and a sustainable capital structure that will enable us to devote capital to grow our business.” The company expects that its cash on hand, combined with funds generated from ongoing operations, will provide sufficient liquidity to support the business during the balance sheet restructuring process.

In addition, Birmingham-based Walter Energy, Inc., metallurgical coal producer for the global steel industry, and its U.S. subsidiaries, filed in the Bankruptcy Court for the Northern District of Alabama largely because of what company upper management called “depressing conditions” and a “new reality” facing the industry.

- Diana Mota, NACM associate editor, and Brian Shappell, CBA, CICP, NACM managing editor

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