San Jose consumers were surprised to learn that the beloved supermarket chain Mi Pueblo has filed for Chapter 11 bankruptcy protection, citing a dispute with one of its primary lenders. In a statement, the grocery chain said it will keep all stores open and stocked during the Chapter 11 proceedings and will use the filing as an opportunity to reorganize the company’s financial prospects.
Bankruptcy Attorney: Mi Pueblo A Unique Case
A local bankruptcy attorney close to the proceedings has determined that the circumstances are unique to this case. The primary lender for Mi Pueblo, Wells Fargo, requested some loan restructuring after it got worried about the company’s debt to credit ratio and its projected revenue forecasts. Spokesmen for the supermarket say that Wells Fargo’s demands were highly unrealistic and “unachievable.”
Few supermarkets have emerged from Chapter 11 proceedings unscathed. The business is a tough one, with most grocers operating with giant lines of credit and good faith with their vendors. But if any has a chance, says a Cincinnati bankruptcy attorney, it is Mi Pueblo, which has never missed a loan payment and is current on all its outstanding obligations. The unique circumstances surrounding Mi Pueblo’s Chapter 11 filing mean it could avoid the fate of its competitors.
Wells Fargo is the originator of a large part of Mi Pueblo’s loans, and if the bank decides to cut off the flow, it would mean tough times; but since the company is on otherwise stable financial footing, it is possible they would be able to generate new cash flow and keep their 22 year old business and 3,260 employees up and running.
Chapter 11 protection prevents Wells Fargo from moving forward with any other legal proceedings while the bankruptcy is sorted out.