MONTVALE, N.J. — A&P here on Monday said it would enter into a new supply and logistics agreement with C&S Wholesale Grocers, marking a key milestone in its restructuring under Chapter 11 and a new agreement with one of its largest creditors.
The contract, which is expected to go into effect upon the retailer’s emergence from federal bankruptcy protection, will generate annual savings of up to $50 million, A&P said. A&P cited its current agreement with C&S — and its inability to successfully renegotiate it — as a significant contributor to its Chapter 11 filing in December.
The agreement is subject to bankruptcy court approval. A&P also on Monday said it would reject its current C&S deal, which went into effect in 2008 and was to have run through 2018.
A&P in court papers described the agreement with C&S as “not only the culmination of a long and arduous process, but the beginning of a renewed and symbiotic relationship between [A&P] and C&S.” A&P said the deal would improve its oversight of C&S to improve service levels. The deal contemplates C&S further consolidating A&P’s warehouses and gives the Keane, N.H.-based supplier “super-priority” on its claims against A&P. The deal is also structured to not be cost-prohibitive in the event A&P fails to emerge from Chapter 11 or is sold to another entity.
“This agreement will strengthen our existing relationship with C&S, as we work together to drive service delivery and reliability enhancements and substantial efficiencies across our operations,” Sam Martin, A&P’s chief executive officer, said in a statement. “The anticipated annual savings will significantly reduce A&P’s cost structure upon emergence from Chapter 11, while ensuring consistent product availability in our stores and greater diversity of products for our customers.”