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The company announced this week that “it has accepted a stalking horse bid from TLI Bedrock to purchase the company for $75 million.”
To facilitate the sale, KB and its subsidiaries have commenced voluntary Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of New York.
Kings currently operates 25 specialty supermarkets, including 23 in New Jersey, one in New York and one in Connecticut. The Balducci’s chain has 10 gourmet market stores in New York, Connecticut, Maryland and Virginia.
As part of the Chapter 11 filing, the company has filed a number of customary "first day" motions seeking authorization to maintain its operations during the court-supervised process, including authority to continue payment of employee wages and benefits, as well as post-petition obligations to its vendor community.
"We are pleased to be moving forward with a sale so we can position Kings and Balducci's for even greater long-term success,” Judith Spires, CEO of KB US Holdings said in a statement. “During this COVID crisis, our associates and communities have demonstrated not only the viability but absolute necessity of our markets in their communities.
“Our sales and service have never been stronger; we are confident we will emerge from this process without missing a beat, well-positioned for future stability and success.”
M. Benjamin Jones, a managing director at Ankura Consulting Group and is advising the bankruptcy filling said that new competition has forced the company into bankruptcy.
“As a result of increasing competition in the already competitive retail food industry, KB experienced historically low (earnings) generation, which has increased KB’s leverage, imposed significant strains on the company’s liquidity and cash flows, and prevented KB from implementing store upgrades and enhancing its technology infrastructure,” Jones stated in a declaration filed with the court.
“Critically, because of KB’s historical liquidity challenges, it has experienced multiple defaults under its prepetition credit agreement and has been unable to pay regularly scheduled principal and interest to its secured lenders since 2018.”
According to reports, KB has a debt of nearly $115 million.
“KB experiences competitive pressures across multiple market segments, including from local, regional, national and international supermarket grocers such as Stop & Shop, ShopRite, Whole Foods, Trader Joe’s, as well as club stores such as Costco, Sam’s Club and BJ’s; drug store grocers such as CVS and Walgreens; discount grocers such as Aldi, Lidl, Dollar General, Family Dollar and Save-A-Lot, and numerous independent and specialty stores,” Jones said in the declaration document.
“The debtors also face rapidly intensifying competition from well-capitalized online grocery giants such as Amazon, Walmart and Target, as well as local online grocers such as FreshDirect, and meal kit operators like Blue Apron and HelloFresh.
“Furthermore, KB’s extensive prepared and fresh food offerings compete directly with countless full service, casual dining, fast casual, quick-service restaurants, many of which offer free delivery.”
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