Tesco‘s US venture Fresh & Easy has filed for Chapter 11 bankruptcy as part of its agreement to sell part of its business to investment fund Yucaipa.

Early last month, the UK retailer said Yucaipa, the investment vehicle of US billionaire Ron Burkle, would acquire over 150 Fresh & Easy stores and the unit’s distribution and production facilities in California. The outlets not included in the deal will be closed.

The grocer filed for Chapter 11 protection in the US Bankruptcy Court of Delaware yesterday (30 September). The chain reportedly cited debt of $500m to $1bn in the filing.

According to Bloomberg, the US Bankruptcy Code will allow Fresh & Easy to reject or renegotiate leases that are no longer economical and hold an auction for the chain’s assets. As the stalking-horse bidder, Yucaipa’s affiliate would have the opening bid. Should no other offers come in, the company would be required to buy Fresh & Easy.

The sale will bring an end to Tesco’s six-year venture in the US, which ultimately proved unsuccessful, with the Fresh & Easy chain yet to make a profit. In April, when Tesco confirmed it would quit the US after a four-month review of the unit, it booked a GBP1bn write-down on the business.

When Tesco announced in December it was reviewing the options for Fresh & Easy, CEO Philip Clarke pointed the finger at an “unprecedented crisis in the markets” on the states the retailer had targeted on the West Coast”.