Fresh & Easy Neighborhood Market Inc., which filed for Chapter 11 protection Sept. 30, has received approval from the courts to auction its stores on Nov. 19, with Yucaipa Cos. emerging as the leading bidder to date.
The proposed auction is expected to save approximately 4,000 jobs and was approved by U.S. Bankruptcy Judge Kevin J. Carey, who also approved guidelines for the sale.
By Nov. 15, all interested buyers must submit offers. Tesco plc, the U.K. parent company of Fresh & Easy, will hold an auction only if it receives a competing qualified bid, according to reports. On Nov. 21, a hearing will be held where auction winners will receive court approval for their bids.
As part of the proposed deal, a Tesco affiliate would lend Yucaipa $120 million to fund the acquisition, and then Tesco would get warrants to buy as much as 10 percent of the equity in the reorganized chain, according to Bloomberg, noting that Fresh & Easy would get 22.5 percent of the equity in the reorganized chain if the Yucaipa offer prevails. Yucaipa has also offered to take on some of Fresh & Easy’s $130-$200 million in liabilities.
To date, Yucaipa has agreed to take over about 150 of the chain’s 167 stores in California, Arizona and Nevada, as well as its commissary in Riverside, Calif.
Fresh & Easy never made a profit for Tesco since the limited assortment grocery and foodservice concept was launched in 2007. The company blamed its failure on the economic downturn in 2008 and falling real estate values on the West Coast. On average, Fresh & Easy lost $22 million a month in the 12 months ended in February, according to court documents.
