(Reuters) - Central Grocers Inc, a supplier to independent grocery stores in the Midwestern United States, is considering a bankruptcy filing as one possible option as it struggles with its debt, according to people familiar with the matter.
Central Grocers is working with law firm Weil Gotshal & Manges LLP, investment bank Peter J. Solomon Co, and consultants from Conway MacKenzie Inc on reviewing strategic alternatives, including a debt restructuring, three people said this week.
The sources asked not to be identified because they were not authorized to speak to the media. Central Grocers declined to comment on any bankruptcy plans. Conway MacKenzie and Peter J. Solomon declined to comment. Weil did not immediately return a request for comment.
The preparations for a potential bankruptcy indicate that Central Grocers, which distributes its own Centrella brand food products to grocery stores, is making contingencies in case an asset sale plan it announced earlier this week is not successful.
The Joliet, Illinois-based company said on Tuesday it was working with its advisors to sell as a going concern a majority of the Strack & Van Til grocery stores it operates, and that it also plans to close nine supermarkets operating under the Ultra Foods banner.
The company, which has about $2 billion in sales annually, is also exploring selling its warehouse, according to the sources.
Earlier this year, Central Grocers, a cooperative owned by independent member grocery stores, told members in a letter that it had received indications of interest in its business from “multiple parties” hoping to expand in its marketplace in the Midwest.
Already operating with razor-thin margins, supermarkets have been under more pressure due to falling food prices and growing competition from big box stores including Wal-Mart Stores Inc and online options such as Amazon.com Inc. Last year, the parent company of Fairway Markets, a New York-area chain of supermarkets, filed for bankruptcy.
In addition to operating Strack & Van Til and Ultra, Central Grocers supplies Midwestern supermarkets Tony’s Finer Foods and Sunset Foods.
The company says it is the seventh-largest grocery store cooperative in the United States, serving 500 supermarkets.
Reporting by Jessica DiNapoli in New York; Editing by David Gregorio