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Tops seeks to reassure vendors, creditors it's 'business as usual'

Steve Desmond could have plenty of reason to be worried.

The president of Heintz & Weber just saw one of his largest customers – possibly even the biggest – file for Chapter 11 bankruptcy protection on Wednesday. That client, Tops Markets, currently accounts for just over 30 percent of annual sales for his company, the maker of the popular Weber's Horseradish Mustard.

So Desmond on Wednesday quickly got on the phone with his Tops representative shortly after the grocery chain's filing, and spent 10 minutes talking through what was happening.

As a result, while he does plan to be "a bit more cautious from order to order," he said Heintz and Weber would maintain a "business as usual" position with the grocery chain.

"We have been assured … that the Chapter 11 filing is to be internal restructuring and will have no impact on any current vendor," Desmond said in an email to The Buffalo News. "I feel comfortable with the conversations I've had and tomorrow will be another successful day."

As Williamsville-based Tops filed its petition for bankruptcy protection, the company simultaneously reached out to its critical suppliers, promising its food providers and other vendors that it would pay them in full under normal terms going forward.

The company acknowledged that unpaid debts for goods and services incurred prior to the Feb. 21 filing, known as "pre-petition claims," cannot be paid without the court's specific approval. "Any claims will be addressed as part of the court process moving forward," Tops said in a separate question-and-answer document for vendors.

But it still sought to reassure them about the future, and asked them for patience. "We are relying on you to continue providing the products and services we need," Tops CEO Frank Curci wrote in a letter to all of its vendors, posted on a special bankruptcy website that the company set up. "With your cooperation, we expect to achieve a successful outcome for our company and business partners like you, as well as for our customers and the communities we serve."

In the meantime, Curci wrote, the grocery company is "continuing to serve customers" and expects "to operate as normal throughout this process."

That was enough to at least partially relieve Try-It Distributing Co., a beer and liquor distribution firm.

"I'm less concerned, because this is a reorganization, and we have a general feel that that's really what it is, given what we know about their situation," said Try-It President Paul Vukelic, who has been in touch with Tops representatives.

"That's why I'm more optimistic than I'm not. That's why I'm feeling pretty good about where that whole situation lies ... They have a pretty good amount of cash flow available to keep stores open and they committed to paying those going forward."

Others are just waiting to see what happens. “We are continuing dialog with Tops Markets and cannot speculate on behalf of their business, as this is an evolving situation,” said Robert Denning, president and CEO of Perry’s Ice Cream in Akron.

Tops filed its petition for bankruptcy protection with the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. The company cited estimated assets of $500 million to $1 billion, but liabilities of $1 million to $10 billion, with more than 10,000 creditors.

In his letter, Curci stressed the importance of the Chapter 11 bankruptcy filing "to position our business for long-term success," and also noted that the filing was voluntary, not forced. He explained that the company is "pursuing a financial restructuring that would substantially reduce our debt and help make us a stronger competitor."

He noted that the company received commitments from lenders for $265 million in new interim financing to keep the business afloat and operating, enabling it to pay its ongoing bills. And he called that "a vote of confidence in our business" that is "expected to support our operations and enable us to meet our obligations during the financial restructuring process."

"It is important to understand that this is a financial restructuring and our operations are strong," Curci wrote. "We are as focused as ever on serving our communities and providing our customers an exceptional shopping experience."

In its filing, Tops listed its 20 largest unsecured creditors. They include debtholders like U.S. Bancorp, which has a $70.7 million claim for notes due in 2021 and another $8.75 million claim for notes due in 2018, as well as benefits for unionized workers.

However, most of the claims are for vendors, such as $54.7 million for C&S Wholesale, $7.8 million owed to Topco and $2.95 million owed to snackmaker Frito-Lay Inc.

Mondelez Global LLC, another snack company that was formerly part of Kraft Foods, has a $1.45 million claim, while Coca-Cola Bottling Company of Northern New England and Pepsi Bottling Group Grocery are owed $2.35 million and $1.96 million, respectively.

But several smaller and even local firms are also on the list. Organic distributor United Natural Foods of Keene, N.H., or Unfi, has a claim for $2.53 million, while wholesaler Sure Winner Foods of Saco, Maine, is owed $1.37 million. Tops owes $1.08 million to Stroehmann Bakeries LC of Pittsburgh and $1.07 million to Wright Beverage Distributing of Rochester. None replied to requests for comment.

Locally, Upstate Niagara Cooperative, which sells dairy products under the Upstate Farms, Wendt, Breakstone's and Bison Dip brands, is listed for $1.5 million. Officials did not respond to requests for comment.

And Kreher's Farm Fresh Eggs LLC of Clarence has a claim for $875,565. Kreher Director of Sales and Marketing Jamey Payne declined to comment.

Tops hopes bankruptcy filing will help it compete

Try-It is not listed in the bankruptcy filing as one of Tops' 20 largest creditors, and Vukelic would not divulge how much Tops still owes it. He said the distributor, which provides both alcoholic and nonalcoholic beverages, is one of Tops' largest vendors because of the nature of its business and the number of stores.

"We do a substantial amount of business with them, no doubt about it," he said. "Anytime somebody declares Chapter 11, there's always a concern there, and we're certainly concerned."

But he noted that Tops did make a sizable bill payment on time on Tuesday, for nonalcoholic beverages. "They didn't have to do that," he said. "It was a pretty substantial bill, and we got the payment as scheduled."

Tops also faces an added risk with beer and wine distributors because state law mandates certain procedures related to payment and credit terms for alcohol. If bills aren't paid after a certain length of time, Try-It is required by law to report Tops to the state, which means the grocer would have to pay by check or cash on the spot, with no credit allowed.

"It's still a little murky about how that's going to go," Vukelic said. "So we're in somewhat of a holding pattern. We're hopeful that they'll pay, but only time will tell."

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