Marsh bankruptcy documents show Sun Capital no longer in control

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Sun Capital Partners has relinquished controlling ownership of Marsh Supermarkets to a limited liability company that plans to sell the remaining stores at auction a month from now, bankruptcy papers show.

The locally based supermarket chain, which has been closing stores at a rapid pace, filed Thursday to reorganize its assets under the protection of Chapter 11 bankruptcy as it seeks a buyer for all or part of the chain and its remaining 44 stores.

Florida-based Sun Capital Partners quietly sold controlling interest in Marsh to Delaware-based JT Grocery Consulting LLC on March 24, the same day it formed. The buyer acquired "25 percent of the economic rights and all of the voting and control rights," bankruptcy papers show. It isn't clear who's behind JT Grocery Consulting. A Marsh spokesman declined further comment.

JT Grocery Consulting has hired Lee Diercks, a veteran retail executive who's founding partner of Hillsborough, New Jersey-based Clear Thinking Group LLC, as chief restructuring officer for Marsh. He'll guide the company through the Chapter 11 process.

Diercks said in a court filing that JT Grocery Consulting will seek bids until June 7 on Marsh’s remaining stores and will conduct an auction on June 12, with a potential closing date of June 25. JT is seeking to hold the auction as quickly as possible to avoid paying additional rent at the stores. 

“ … July rent for a number of the core stores will come due on June 25, and the debtors are simply not in a position to incur July rent for the related leases,” according to the document. 

IBJ has reported that several landlords of properties where Marsh operated stores are suing to recoup unpaid rent. The filing says Marsh will take steps to reduce expenses moving forward, including filing additional contract and lease-rejection motions in court as more stores close. Retailers in Chapter 11 typically use the bankruptcy process to get off the hook for leases of closed stores.

If the auction fails to produce a buyer, Marsh “could be left with no other option but to immediately commence store-closing sales at the core stores, which will result in a fire-sale liquidation of the assets.”

IBJ reported Tuesday that Marsh is prepared to close all its stores within two months unless it can find buyers or business partners. But there appears to be some interest in what’s left of the chain, which boasted 120 stores in 2006, when Sun Capital acquired the company.

Marsh says in the bankruptcy document that Peter J. Solomon Co., the New York City-based investment banking firm it hired to help unload the stores, contacted more than 40 entities to gauge their interest in the remaining stores. Of those, 35 entered into confidentiality agreements, and five expressed interest in “various groups of stores representing nearly all of the 44 core stores.”

Still, “going-concern buyers for [Marsh] have not yet emerged. However, some of these parties are still engaged in active due diligence,” Marsh said in a court filing.

Marsh currently operates 60 stores—54 in Indiana and six in Ohio. Sixteen of those are set to close by the end of May. That would leave 44 remaining “core” stores that now are in danger of closing if a buyer isn’t found, including 16 listed in a document Marsh provided to the Indiana Department of Workforce Development on Tuesday. 

It was not clear why Marsh only noted 16 closures in its notice to the state, filed in accordance with the Federal Worker Adjustment Retraining and Notification, or WARN, Act.

Marsh has been hammered in recent years by increased competition and price-cutting, rendering it unable to compete with larger grocery chains such as Kroger, Meijer and Wal-Mart.

Kroger and Meijer alone have invested more than $100 million in remodeling projects and new-store construction in its markets, Marsh said in the filing. At the same time, Marsh invested $15 million. The investment, however, did not achieve the sales boost Marsh expected. In addition, openings of new stores by competitors caused double-digit sales declines at several Marsh stores. As a result of the disappointing sales trends, Marsh "began facing liquidity challenges," the filing said.

To raise cash, Marsh in late April sold its  pharmacy business to CVS Health. Terms of the transaction were not announced at the time of the sale, but a bankruptcy filing says the purchase price was $38 million.

Marsh estimates in court papers that its assets are worth $50 million to $100 million. It said it has liabilities of $100 million to $500 million.

The grocery chain said it owes more than $37 million to securied lenders. 

The two largest unsecured creditors are Central States Southeast Areas Pension Fund, which is owed $62 million, and a Marsh Supermarkets Prudential Retirement contract, owed $22 million.

The third largest creditor is Marsh's primary grocery supplier, Supervalu Inc., which Marsh signed to a long-term contract last year. SuperValu is owed $8 million.

Marsh Supermarkets was founded in Muncie in 1931 by Ermal Marsh.

   

     

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