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Bloomberg reports that Tesco-owned Fresh & Easy Neighborhood Markets in the western US has filed for bankruptcy protection in a Delaware court "so it can sell itself at auction with an affiliate of billionaire Ron Burkle’s Yucaipa Cos. as the lead bidder." The filing listed debt of as much as $1 billion and assets of up to $500 million.

"Under the proposed deal," Bloomberg writes, "a Tesco affiliate would loan the Yucaipa affiliate $120 million to help fund the takeover. Tesco would get warrants to buy as much as 10 percent of the equity in the reorganized supermarket chain. Should Yucaipa win a proposed court-sanctioned auction, a Tesco unit would retain 22.5 percent of the equity in the reorganized chain."

Yucaipa has already agreed to buy 150 of Fresh & Easy's stores. Filing for bankruptcy makes it easier for the company to cancel outstanding leases for stores it does not want to retain.
KC's View:
Tesco continues to maintain that the economic downturn, beginning in 2008, was primarily responsible for Fresh & Easy's failure. Which ignores, I think, the fact that Tesco's misreading of the marketplace was enormous, and wholly unexpected considering Tesco's reputation for consumer research.

One can only assume that Yucaipa will do better, regardless of what it does with the Fresh & Easy stores.