Mi Pueblo, which has 21 Northern California stores targeting Hispanic shoppers, filed for Chapter 11 bankruptcy protection July 22, claiming it has financing issues with its main lender.
In a letter to its vendors, dated on the same day, Juvenal Chavez, founder and chief executive officer, said all stores would remain open as the supermarket chain reorganizes.
"Despite the fact that we have always paid our debtsand have followed the rules, the bank that we have been working with has left us with no other options than to file for Federal Chapter 11 bankruptcy protection," he wrote.
Chavez said that an impasse occurred in negotiations with the bank, which is Wells Fargo according to court documents, and that the company will use the time afforded in the bankruptcy proceeding to secure new financing.
"It is our intention to work with the court to pay all of our vendors," he added in the letter.
Undoubtedly speaking of meat and produce, Chavez acknowledged in the letter that some vendors do have a priority position because of "agricultural statutes" and a plan will be put forth quickly to pay these vendors.
Under the provisions of the Perishable Agricultural Commodities Act Trust, produce suppliers have a priority status and are first in line to be paid for their delivered fruits and vegetables out of any assets that the firm does have.
Bart Botta, a partner in the law firm of Rynn & Janowsky in Newport Beach, CA, told The Produce News July 24, that First Day Motions in the bankruptcy proceedings would be filed by the debtor's attorney later that day. He said among the motions is one to pay PACA Trust creditors.
Botta said the initial filing lists about $1.1 million in product debt. He said produce creditors that have contacted Rynn & Janowsky have claimed a bit more debt than listed, but not substantially, and each has said that Mi Pueblo is current on their invoices.
That leads Botta to believe that there are sufficient funds to pay off produce creditors, and possibly, to continue operations uninterrupted as the chain claims it plans to do.
Mi Pueblo spokeswoman Perla Rodriguez told the San Jose Mercury News that the company's problems are not an issue of payroll or sales.
"Mi Pueblo is dealing with a very difficult creditor," she said. "We're at an impasse and we're seeking protection from the court."
The company claims it has never missed a payment. "Mi Pueblo is current on all obligations to employees, suppliers and all of its creditors, including its secured creditors," according to the declaration filed in bankruptcy court by Chavez.
Mi Pueblo began as a one-store operation in San Jose in the early 1990s. It has grown to 21 stores, with its newest stores much larger than 50,000 square feet and including massive produce, meat and fresh food departments.
The stores cater to the Hispanic community but attract many Anglo customers throughout the Bay Area. On any day, the stores are teeming with customers and products. And, in fact, local news reports from around the Bay Area following the bankruptcy indicated that the stores are still fully stocked.