US grocery distributor Fleming has filed for Chapter 11 bankruptcy protection less than two months after losing a US$4.5bn supply deal with convenience store chain Kmart.
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The loss of the contract with Kmart, which itself filed for bankruptcy protection over a year ago, left Fleming struggling to find new business deals while also undergoing an investigation by the Securities and Exchange Commission into its accounting practices.
Last week Fleming warned that unless it was able to obtain sufficient alternative financing, it believed that its 2002 financial statements would likely include a going-concern uncertainty.
In a statement this week, Peter Willmott, Fleming’s interim president and CEO, said that filing for Chapter 11 protection was the only choice that would allow the company to continue operating as a going concern, with renewed trade credit support, while negotiating with creditors toward an adjustment in Fleming’s debt level.
In documents filed yesterday [Tuesday] with a bankruptcy court in Delaware, Fleming listed assets of $4.2bn and debt of $3.5bn.
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By GlobalDataSources close to the matter told Dow Jones Newswires that Fleming was negotiating for $150m in debtor-in-possession funds and had secured immediate access to $50m of that amount, in order to continue operating.
Among creditors holding unsecured claims, Fleming owes $5.8m to ConAgra Foods, $4.5m to Procter & Gamble, $4.2m to General Mills and $3.5m to Unilever, reported the Wall Street Journal.
Fleming said in a statement that it expects to establish a critical vendor programme to enable the company to pay its associates on time and in the usual manner.
A spokeswoman for Campbell Soup, which is owed just under $2m by Fleming, told Dow Jones Newswires that it expects to resume business with Fleming “fairly quickly”.
ConAgra Foods, which is the food company owed the most money by Fleming, said it does not expect Fleming’s troubles to have a material impact and that Fleming will continue to distribute its products.
