BELLINGHAM — A U.S. District bankruptcy court has granted grocery store chain Haggen the right to borrow up to $215 million to continue operating its stores, one of which is in Port Angeles, through the date of a Oct. 5 bankruptcy hearing.
Haggen filed Tuesday for Chapter 11 bankruptcy protection.
Documents filed Thursday in the U.S. District bankruptcy court in Delaware show that the court will allow Haggen to borrow money in a debtor-in-possession financing plan led by lender PNC Bank, according to The Oregonian of Portland, Ore.
The court order says the interim loan is “vital” to the preservation of the company as it prepares to reorganize, the Oregonian newspaper said.
The money will allow the firm to continue operating and maintain inventory while it reorganizes its operations and assets and sells some of its stores.
The fate of the Port Angeles Haggen store at 114 E. Lauridsen Blvd. — the only Haggen store on the North Olympic Peninsula — is unknown now.
“As mentioned in our press release, we have filed voluntary Chapter 11 petitions to reorganize around a reduced portfolio of locations,” company spokeswoman Deborah Pleva said in a Wednesday email.
“We cannot comment further at this time.”
While the company didn’t specify how many stores it would sell, Haggen said it would focus its reorganization on profitable “core” stores and that it is in talks to sell “many of the company’s remaining assets.”
The Bellingham-based chain ballooned from 18 stores to 164 when it purchased 146 stores from Albertsons and Safeway earlier this year.
Haggen had announced plans last month to close or sell 27 stores. The only Washington state store slated for closure is in Spanaway, near Tacoma, according to Haggen. Other targeted stores are in California, Arizona, Nevada and Oregon.
It recently parted ways with one of its CEOs, The Oregonian said, and it now faces multiple lawsuits.
Haggen recently sued Albertsons for $1 billion, claiming it did not fulfill terms of the purchase agreement.
Haggen was also sued for $41.1 million by Albertsons, which alleges that Haggen didn’t pay for part of the inventory that came with the stores, The Seattle Times said, adding that Haggen officials say the lawsuit came in response to its own allegations that Albertsons violated the purchase agreement for the stores.
According to Tuesday’s bankruptcy filing, Haggen owes its creditors more than $55 million.
The bankruptcy filing lists Haggen’s creditors, including distributor Unified Grocers, vendors like Coca-Cola and Frito Lay, and money transfer service MoneyGram, as well as Albertsons.
The Seattle Times reported that last month, the company began cutting worker hours in the Seattle area and undertook hundreds of layoffs and work-hour reductions in California, Arizona and Nevada.
Chapter 11 is a chapter of Title 11 of the United States Bankruptcy Code. When a business is unable to service its debt or pay its creditors, it can file in federal bankruptcy court for protection under either Chapter 7 or Chapter 11.
In Chapter 7, the business ceases operations and a trustee sells all of its assets and then distributes the proceeds to its creditors. Any residual amount is returned to the owners of the company.
In Chapter 11, in most instances, the company remains in control of its business operations as “a debtor in possession” and is subject to the oversight and jurisdiction of the court.
Chapter 11 gives “the debtor in possession” a number of ways to restructure its business.
