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Home / Press Release / A&P’s Unsecured Creditors Seeks $19M from PepsiCo, Frito-Lay’s and Others in GAPT Bankruptcy Cases

A&P’s Unsecured Creditors Seeks $19M from PepsiCo, Frito-Lay’s and Others in GAPT Bankruptcy Cases

The unsecured creditors of the A&P supermarket chain intend to sue all vendors who received preferential payments worth about $19 million made in the 90 days before A&P’s July 2015 bankruptcy filing.

The unsecured creditors of the A&P supermarket chain, the Great Atlantic & Pacific Tea Company, Inc., (“GAPT” or the “Debtor”) filed suit against nearly 25 vendors who were paid more than $19 million in the three months before GAPT filed for bankruptcy protection. With the onset of adversary proceedings, some of GAPT’s creditors this week are finding themselves under the gun to pay back the Debtor.

The affected vendors might need to repay money GAPT paid them for goods and services so that other unsecured creditors in a similar situation can be compensated more fairly, experts say. The payments may be recoverable if they are proved as “preferences” under the U.S. Bankruptcy Code. It was unclear immediately how much of the recovered funds could go to GAPT and how much would need to be redistributed to other GAPT creditors who were not paid in full as a result of the bankruptcy.

New Jersey bankruptcy law firm Gibbons P.C represents the Official Committee of Unsecured Creditors of GAPT in the matter, according to the court papers. Experts say that the unsecured creditor’s legal move is common in other bankruptcy proceedings in which a debtor is obligated to treat its creditors as fairly as possible if they have a similar relationship with GAPT. The rationale is that it is a more equitable distribution of GAPT’s limited assets when creditors who had been paid immediately before the bankruptcy filing share some of the financial hit with those who are still owed money.

GAPT has been a venerable supermarket grocery store chain in the United States, with stores located throughout the United States, including in the States of New York and New Jersey. GAPT’s primary retail operations consisted of supermarkets operated under a variety of trade names, or “banners” including A&P, Waldbaum’s, SuperFresh, Pathmark, Food Basics, The Food Emporium, Best Cellars and A&P Liquors.

The Debtors started to face substantial financial distress towards the beginning of April 2015, which possibly gave way to the bankruptcy filings by the Debtors. The Debtors, however, continued its operations and kept purchasing goods from the defendants PepsiCo, Bottling Group, Frito-Lay, Pepsi Metro, Pepsi Hasbrouck, Pepsi Bottling and Pepsi Pennsauk. Eventually, the Debtors filed for bankruptcy, and the committee of unsecured creditors brought adversary actions against several defendants to recover the alleged transfers on behalf of the GAPT bankruptcy estate.

According to the complaint filed in the court, the aggregate amount of the alleged transfers is not less than $19,352,470. The Committee has alleged that the Debtors were insolvent at the time the disputed transfers were made. The Committee also states in its complaint that as of the petition date, the liquidation of the Debtors’ assets under Chapter 7 of the Bankruptcy Code would not have generated sufficient proceeds to satisfy the secured claims against the Debtors. Consequently, the receipt of the alleged transfers allowed the defendants to receive a distribution greater than they would have received under the priorities set forth for a Chapter 7 liquidation of the Debtors’ estates if the transfers had not been made.

GAPT filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on July 19, 2015. The Debtors continued to operate their businesses and manage their properties as debtors-in-possession under §§ 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these cases so far. The Debtors’ Chapter 11 Cases are jointly administered under Case No. 15-23007 in the United States Bankruptcy Court for the Southern District of New York. Honorable Judge Robert D. Drain is presiding over the Debtor’s bankruptcy cases.

Contact Roland Gary Jones: (877) 869-3998 or rgj@rolandjones.com or visit: www.rolandjones.com

Follow him on Twitter @rgj520109

Jones & Associates is a New-York based boutique law firm whose practice focuses on bankruptcy litigation. The firm’s bankruptcy practice is devoted primarily to representing defendants of preference and fraudulent transfers’ actions. The firm has represented creditors and defendants in many committees, debtor or bankruptcy trustee initiated lawsuits in bankruptcy cases such as Linens Holdings, Fairfield Sentry, Circuit City, Enron, TWA and many others.

Roland Gary Jones, Esq. is the owner of Jones & Associates. For Roland Gary Jones’ bio, click here.

For preference defendants looking for an analysis of defenses that can be asserted in response to the Debtor’s preference complaint, here are several videos on this topic:

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