CHARLOTTE, N.C. (Catherine Muccigrosso/Charlotte Observer) - As Earth Fare stores in the Charlotte area prepare to close their doors next week and lay off hundreds of workers, bankruptcy court documents reveal what led to the filing and what will happen next.
Signs posted Wednesday give notices of six or seven days to go at the seven area stores, employees said, including south Charlotte, Steele Creek, Huntersville, Concord, and Fort Mill and Rock Hill in South Carolina.
On Monday, the Asheville company notified the state Commerce Department of nearly 800 layoffs via a Worker Adjustment and Retraining Notification Act, or WARN, notice.
“Earth Fare has been engaged in negotiations for refinancing of the company’s bank loan obligations, as well as the sale of the company to a buyer which would have allowed its operations to continue,” the WARN notice stated. “We were recently informed, however, that the buyers has unexpectedly withdrawn from the sale process. Additional financing we were trying to obtain fell through at the same time.”
Compounding the unsuccessful sale, the company’s largest supplier also discontinued product shipments effective Friday.
Earth Fare has more than 3,000 employees. The company said it plans to close stores through March 2 with all of its employees permanently laid off.
“This decision and our inability to provide more advance notice is the direct result of the sudden and unanticipated withdrawal of the buyer from the sale process,” the company stated in the WARN notice.
According to Feb. 5 court documents, two employees filed a class-action lawsuit claiming they are entitled under the WARN Act to recover their wages and certain retirement benefits for 60 days, “none of which has been paid.”
A bankruptcy judge will have to allow the claim before any judgment is issued, McClatchy previously reported.
However, it’s possible the company could still be sold. On Tuesday, a notice of a sale of property free and clear of liens was filed for the company and its assets at auction with bidding underway. The auction is Feb. 25 and sale hearing date is at 2 p.m. Feb. 27. court documents show.
According to court documents, the company founded in 1975 decided to file for Chapter 11 after failing to secure a buyer last month.
Earth Fare sought cost-savings initiatives to improve liquidity, including the sale of five of its under-performing stores. Facing the maturity of its loan obligations, Earth Fare filed for Chapter 11.
According to Feb. 4 filings, “While many of the company’s expansions have been successful, others have struggled for a variety of reasons unique to store location or competition in certain markets. At the same time, many of Earth Fare’s legacy stores required significant capital improvements, which caused a strain on liquidity.”
In 2012, the company’s current majority equity sponsors and co-investors acquired their majority equity interest in the company. EF Investment Holdings owns 100% of the equity in Earth Fare.
In 2019, court documents show, Earth Fare hired a financial advisor to seek potential investors, receiving several proposals. However, none were for an amount sufficient to refinance its existing indebtedness.
Last May, the company began exploring the sale of the company as an alternative to the refinancing effort, which included “two major retailers.” Negotiations with one of the retailers failed.
In December, facing tightening liquidity and the imminent maturity of loan obligations, the company initiated the sale of five of its under-performing stores.
On Jan. 8, Earth Fare received a non-binding term sheet from a potential buyer for 33 stores and its headquarters operations, documents show. Finalizing terms of the agreement began Jan. 28 but the next day, the potential bidder said it was no longer interested. The documents did not identify the potential buyer.
On Jan. 31, the largest supplier, which was not named, advised Earth Fare it would no longer be shipping goods because of unpaid bills.
Liquidation sales began this month.