Homeland supplier to help grocery chain out of bankruptcy

Wednesday, June 26th 2002, 12:00 am
By: News On 6

OKLAHOMA CITY (AP) _ The main supplier to Homeland Stores Inc. will offer more than $47 million to lead the grocery chain out of Chapter 11 bankruptcy, officials announced.

Associated Wholesale Grocers (AWG), based in Kansas City, Kan., would take control of the company's 44 stores under the plan filed in U.S. Bankruptcy Court in Oklahoma City on Tuesday.

AWG, which owns a distribution center in Oklahoma City that employs about 300 people, supplies about 70 percent of products sold in Homeland stores.

David B. Clark, president of Homeland Holding Corp., said the proposal would involve payments to secured and unsecured creditors. Shareholders of Homeland stock would not receive any payments.

``AWG and Homeland are already business partners, which is a major plus in putting together this opportunity,'' Clark said.

The retailer-owned cooperative supplies more than 850 retail grocery stores in 10 states and has an annual sales volume of more than $3.2 billion.

``AWG's involvement in our current financing arrangements has allowed us to move in a strategic and effective manner through the reorganization process,'' Clark said.

Homeland entered bankruptcy in August and has closed or sold 34 stores and trimmed administrative operations since then.

If approved, the acquisition would involve ``substantially all the remaining stores,'' the company said in a news release. ``It is AWG's intention that all acquired stores will remain open and operating under the Homeland banner.''

Chuck Gilmer, publisher of the grocery industry trade publication Shelby Report, said it's not unusual for independent grocers or smaller regional chains to be purchased by their wholesaler.

``On a smaller scale, it happens every day. ... For whatever reason, sometimes a wholesaler will take possession and broker the deal,'' Gilmer said.

AWG could still strip down the operation and sell off stores, he said. Several of Homeland's recent store sales have been to smaller chains looking to grow.

In April, Homeland reported its third consecutive unprofitable year, posting a $46.4 million loss largely due to reorganization costs. For the first quarter, reported in May, the company saw a $2.3 million loss after paying almost $3 million more in reorganization expenses.

``We are pleased with the position of the company at this point in our reorganization. And we are encouraged by the performance of our stores, which, we believe, bodes well for the future of the company and led to the offer by AWG,'' Clark said.