Fred’s files for Chapter 11 protection

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Fred’s files for Chapter 11 protection

By David Salazar - 09/09/2019
Fred’s has filed for bankruptcy. The chain on Monday said it had commenced Chapter 11 proceedings in the U.S. Bankruptcy Court for the District of Delaware. The company also has begun liquidation sales at its stores, which it said are expected to close in the next 60 days. Most of Fred’s pharmacies will continue filling scripts as it continues to pursue selling them as part of the proceedings.

Fred’s also said it also filed a motion seeking approval to enter into a proposed debtor-in-possession financing agreement with some of its lenders, a move that would offer up to $35 million in new financing.

“Despite our team’s best efforts, we were not able to avoid this outcome,” Fred’s CEO Joe Anto said. He continued, “I want to thank all of our employees for their hard work and continued support of the company as we wind-down our operations.”

Fred’s has filed customary motions seeking “first-day” relief, including authorization to continue paying employee wages and salaries, as well as continue providing employee benefits without interruption, among other expenses.

Fred‘s has been working to turn the company around for more than a year. Last June, the company sold its specialty pharmacy business unit to a subsidiary of CVS Health, and began courting buyers for its retail pharmacy business. Last September, Walgreens purchased files and inventory from 185 of the company's stores. Anto was named permanent CEO in February after an eight-month stint as interim CEO. Around the same time, as part of its full-year financial results, Fred entered a forbearance agreement with its lenders, which was accompanied by a note from the company's accountant noting substantial doubt about the company's ability to continue as a going concern.

This year, the company's store footprint has shrunk from roughly 500 to less than 100 since April when it began its first round of closures, which shrunk its store base by 30%. In the company's first-quarter results, it posted a $29.5 million net loss.

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