MILAN, Ill. -- Eagle Food Centers here said last week it plans to seek bankruptcy court approval later this week to establish bidding procedures for the sale of "substantially all" of its operating assets.
It will also seek the court's OK to close nine of its 59 stores by the end of July, when the company's second quarter ends.
Chuck Cerankosky, an analyst with McDonald Investments, Cleveland, told SN Eagle's ability to find buyers for its stores may depend in part on its union contracts and how competitive they are. "What constantly comes up in the food industry is that the companies having problems and closing stores usually have uncompetitive in-store productivity issues -- not wage issues but work-rule issues," he said.
He said he's not sure how successful Eagle will be in selling stores. "It depends on how many stores are viable."
A Chicago-area industry observer who asked not to be named told SN he expects Eagle to have a tough time selling all of its assets. He said he expects potential buyers to cherry-pick the best of the store locations and for Eagle to close the rest prior to liquidating the company.
"Eagle has been trying to sell the chain as a whole for several years, and that's been the No. 1 problem," he pointed out. "Eagle's value is in a select few stores, and that's it. It has some good stores, and the rest are just not going to work. So selling some and closing the rest is the right answer."
He estimated that less than half the chain's 59 stores are viable sales candidates.
He said potential buyers could include Supervalu, Minneapolis; Fresh Brands, Sheboygan, Wis.; Central Grocers Cooperative, Franklin Park, Ill.; and Certified Grocers Midwest, Hodgkins, Ill.
Eagle has been operating under Chapter 11 bankruptcy protection since April 7. It is scheduled to present the matters to the court at a hearing on Friday.
If Eagle gets the court's approval to accept bids for the stores, it will be up to the chain's creditors' committee to determine if the interest among potential buyers and the money being offered is sufficient to proceed with an auction, a chain spokesman told SN. "If there's not enough interest, the committee could go ahead and seek to generate a go-forward plan for Eagle to stay in business."
Asked if there was much interest in Eagle locations, given that the stores have been for sale for several years, the spokesman said, "It's been no secret that Eagle's stores have been for sale, but once you file, it generates more interest."
He said Huron Consulting Group, the Chicago-based restructuring adviser that has been working with Eagle on strategic alternatives, has been handling all inquiries, "and they've been putting together a dossier of companies interested in certain stores."
Since filing for Chapter 11, Eagle has sold two stores to area independents, the spokesman said.
Robert J. Kelley, Eagle chairman, president and chief executive officer, said the chain has been exploring alternatives that would result in maximum recovery for creditors and, at the same time, have the least impact on employee jobs.
"After careful consideration, it was determined that an evaluation of a sale of the company's stores, either individually or as a whole, may yield the optimum results on behalf of employees, customers, suppliers and creditors," Kelly said.
However, he said Eagle also plans to continue to develop a stand-alone plan of reorganization to maintain and operate the stores. Accordingly, it wants to close nine of its weaker stores so it can concentrate resources on operations with the strongest potential for future growth, whether the company liquidates or moves forward with a restructuring, Kelly said.
The nine stores include two Eagle units in Iowa and six in Illinois, plus a BOGO (Buy-One-Get-One) Food and Deals in Princeton, Ill.