Back in December 2010, we were “stunned” when we learned that in a what was a clear case of a supermarket chain unable to pass through costs to consumers, the Great Atlantic Pacific Company (“Great Atlantic”, “AP” or the “Debtors”), which in 1936 became the first national supermarket chain in the US, would file for bankruptcy adding that “it is ironic that instead of passing through costs supermarkets are instead opting out to default”. Although perhaps even back then it was clear to AP that the capacity of US consumer to shoulder higher prices is far worse than what the mainstream media would lead everyone to believe.
Fast forward to last night, when less than five years after its first Chapter 11 filing (and three years after emerging from a bankruptcy in March 2012 as a privately-held company part owned by Ron Burkle’s Yucaipa with a clean balance sheet including $490 million in new debt and equity financing), overnight Great Atlantic, which controls such supermarket brand names as AP, Waldbaum’s, SuperFresh, Pathmark, Food Basics, The Food Emporium, Best Cellars, and AP Liquors – filed for repeat bankruptcy, or as it is better known in restructuring folklore, Chapter 22.
So what happened in the intervening 5 years that caused the company which employes 28,500 workers (93% of whom are members of one of twelve local unions and who are employed by AP under some 35 separate collective bargaining agreements) to deteriorate so badly that it burned through all of its post (first) petition cash and redefault?
In one word: unions.
Because just like in the case of comparable Chapter 22 (and subsequently liquidation) case of Twinkies maker Hostess, so AP is blaming the unwillingness of its biggest cost center, its employees, to negotiate their way out of what will be an