“I think, that one secret source of pleasure very generally derived from this performance … is the satisfaction the spectator feels in the circumstance that likenesses of men and women can be so knocked about, without any pain or suffering.” — Letter about Punch and Judy show from Charles Dickens to Mary Tyler, 1849
Some change seems invisible. Tops Friendly Markets, which counts stores in New Paltz, Lagrangeville, Rhinebeck and Tannersville among its most sourthernmost locations, is officially out of the Chapter 11 bankruptcy status it entered on February 21.
Outwardly, little has changed. “We are moving forward as a stronger company,” said CEO Frank Curci. “We are investing in our stores and rolling out new services that make shopping with us even easier.”
But a lot has changed. Tops’ debt has been reduced from more than $700 million to about $250 million. Its interest payments, more than $80 million last year, will be reduced to more than $55 million – though these sums would increase if interest rates go up. The company negotiated substantial cuts of its pension obligations with its unions. It obtained new outside financing.
There’s something in the deal for current upper management, too. The top executives will get to divide $3.6 million in bonuses amongst themselves for their troubles and get a ten percent ownership stake.
For more than a decade, private equity firms have been buying companies – typically grocery chains and groups of daily newspapers – through leveraged buyouts and saddling them with debt loads that in some cases, like that of Tops, have thrown them into bankruptcy. Tops was bought by Morgan Stanley Private Equity in a $310-million leveraged buyout in 2007. Morgan Stanley put $724 million in debt (including $277 million in dividends to itself and other investors) on Tops, which owned considerable real estate to borrow against, and then in December 2013 arranged a buyout of the company, including all its debt, by management. Unable to pay the interest on its debt, Tops Friendly Markets filed for bankruptcy this February and began restructuring.
The national retail economy, which sometimes resembles an entrepreneurial arena and sometimes a Punch ‘n’ Judy show, continues its evolution. Supermarket companies talk about investing in their stories and offering new services. They express concern about competition from Whole Foods, Trader Joe’s and health-food stores. But many of them still carry not only anxiety about competitive disruptors but also uncomfortable levels of debt that leave them vulnerable to financial shocks.
Tops still has a rocky, narrow path it must follow. The upstate grocery chain, which employs 12,000 people, has now emerged with new strategies for increased home deliveries by zip code (Instacart), everyday low prices and greater emphasis on specialty foods.
In New Paltz, the weather is getting colder during this season, the days shorter, the shopping lines longer. ’Tis the season for holiday fairs, turkey trots, food drives, early tree lightings, flea markets, governmental budget preparations, holiday preparations, and solemn ceremonies. Can seasonal carols, Sinterklaas, estate tours, end-of-year movies and other traditional holiday activities be far behind?
We all need to eat. Supermarkets are one of the few retail activities in which practically all of us participate. And most of us appreciate having a choice of where and when we go to shop.