Balducci”™s and Kings Food Markets in Westchester and Fairfield have declared bankruptcy, citing fierce competition and staggering debt.
KB US Holdings Inc. and nine affiliates filed Chapter 11 petitions Aug. 23 in U.S. Bankruptcy Court in White Plains listing $193.8 million in assets and $200.2 million in liabilities.
“The board concluded ”¦ that the best and only viable path to maximize the value of KB”™s business and preserve thousands of jobs is to commence these Chapter 11 cases,” M. Benjamin Jones, chief restructuring officer, stated in an affidavit.
Louis “Pop” Balducci ran a fruit and vegetable stand in Brooklyn in 1915, and with his son, Andy, opened their first store in Greenwich Village, in 1946. Now it has 784 employees and 10 stores in four states, including Scarsdale and Rye Brook in Westchester and Riverside and Westport in Fairfield.
The first Kings Super Market opened in Summit, New Jersey, in 1936. Now it has 2,129 employees and 25 stores in three states, including a market in Old Greenwich. Kings Food Markets acquired Balducci”™s Food Lovers”™ Markets in 2009.
Both grocery chains have developed reputations as specialty gourmet markets, according to Jones, featuring artisan cheeses, for example, full-service butchers and fishmongers, and other upscale services.
Their strengths have been counteracted by a variety of competitors: large regional and national chains such as Stop & Shop and Whole Foods; club stores such as Costco and Sam”™s; drug store grocers including CVS and Walgreens; discounters such as Aldi and Dollar General; online giants like Amazon and Walmart, and locally, FreshDirect; meal-kit services like Blue Apron and Hello Fresh; restaurant delivery services such as DoorDash and UberEats; and even specialty coffee shops like Starbucks.
Large grocers, such as Amazon/Whole Foods and Walmart/Sam”™s Club, buy a lot of goods and have access to cheaper capital, according to Jones, enabling them to sell products at lower prices, pay higher wages, advertise more and invest in technology.
Kings also has high labor, pension and benefit costs for union employees.
KB US Holdings was formed in 2016 and GSSG Capital Corp., a privately held firm in Doha, Qatar, acquired a majority interest.
In late 2018, KB US Holdings hired Ankura Consulting Group, where Jones is a senior managing director, to negotiate with creditors and develop a strategic plan.
PJ Solomon investment banking firm contacted 114 potential buyers, identified 67 interested in buying the assets, and ultimately negotiated with two parties, according to an affidavit by Scott Moses, PJ Solomon managing director.
None of the potential buyers were willing to assume KB”™s liabilities, Jones stated, particularly the labor and pension obligations.
Whitehorse Finance of Miami agreed to provide up to $20 million in credit.
Last month, TLI Bedrock, a Manhattan investment fund, offered $75 million for 30 stores, the headquarters in Parsippany, New Jersey, and a storage facility.
The agreement was conditioned on reaching a deal with unions in 30 days, and it is subject to better offers. TLI Bedrock was unable to make a deal with the unions, according to Jones. Bids for the company must be submitted by Oct. 2, for an Oct. 8 bankruptcy auction.
KB US Holdings booked about $589.4 million in sales and nearly $236.5 million in gross profit in the past 12 months. But after depreciation, amortization, interest and other operating costs, it lost about $8.6 million.
It has debt obligations of $114.2 million and trade claims of $20.5 million.
KB US Holdings is represented by Manhattan attorney Vincent Indelicato of Proskauer Rose LLP.
