Fresh & Easy Neighborhood Market Inc. filed for Chapter 11 bankruptcy in U.S. Bankruptcy Court, weeks after being promised to Los Angeles billionaire Ron Burkle.
The grocery chain, which is in the process of trading hands from British supermarket giant Tesco to Burkle’s Yucaipa Cos., cited debt between $500 million and $1 billion in its court filing Monday.
The move “is simply the next step in the restructuring process” during the sale and will have “no impact” on customers’ shopping experience, Fresh & Easy said in a statement.
“It’s business as usual as we continue the transition to new ownership,” the company said.
As of early September, Fresh & Easy operated more than 150 U.S. stores in California, Arizona and Nevada from its El Segundo headquarters and had more than 4,000 employees.
But with six unprofitable years in the rearview mirror and a deal with Burkle, Fresh & Easy recently started closing down some stores, including a handful in San Diego.
The brand ran into troubles from its inception, opening in the crowded and ultra-competitive West Coast grocery market on the eve of the recession and relying heavily on technology in an industry driven by human contact.
Some analysts believe Burkle’s game plan now is to use Fresh & Easy space to relaunch grocery chain Wild Oats Markets Inc., which has been closed since 2007.
A trademark application filed by Wild Oats Marketing surfaced this summer with Yucaipa’s Sunset Boulevard address.
With Fresh & Easy in bankruptcy, Tesco can back out of leases before they conclude and auction off the brand’s assets. Yucaipa, through an affiliate, would then have the right to bid first for the chain in a November court auction.