Steep concessions in the last two weeks from unionized workers - a condition of a $490 million buyout offer from investment firms that owned some of the company's $1 billion in debt - were a turning point in the yearlong odyssey through Chapter 11 reorganization.
Those compromises, and prior ones forged, were as painful as they were palliative, and all done in the name of keeping investors such as Goldman Sachs and private-equity man Ron Burkle interested in buying the bankrupt company, rather than having A&P sell itself off for parts like a scrapped old car.
Stores were closed, leases torn up, and vendor contracts renegotiated. But with the revised union contracts, the cost-cutting is now over, and the once-Wall Street-traded corporation may emerge as a privately owned business as early as February.
It will have 335 stores and a third of the debt it had when it went bankrupt. And top officials are so heartened by its newly lean finances that in recent days they met Philadelphia's mayor about possibly opening new locations here.
What loosened the bankruptcy quagmire was ratification by roughly 37,000 United Food and Commercial Workers (UFCW) members of $625 million in givebacks over the next five years, said Marc Perrone, the union's international secretary-treasurer in Washington. The new contracts reduced take-home pay and other benefits but left pension funds intact, he said.
"These changes were difficult but necessary," chief financial and restructuring officer Jake Brace, who attended the new-store meeting a week ago with Mayor Nutter, said in an interview Friday.
"The changes that we negotiated with the unions were what we needed to get our cost structure in line and to get the company on sound financial footing going forward, and to successfully reorganize the company and save more than 30,000 jobs," Brace said.
