The Food Partners, LLC

Dahl’s files $41 million bankruptcy

The Des Moines Register
Patt Johnson, pjohnson@dmreg.com 10:43 a.m. CST November 11, 2014

Dahl’s Foods Inc., the 83-year-old Des Moines-based grocery store chain, will disappear from the local landscape as a locally owned company. But the supermarket’s leaders said it will emerge from bankruptcy a stronger and more viable company.

The 10-store chain filed a $41 million bankruptcy petition in federal court Sunday asking that it be allowed to reorganize and sell its stores. The likely buyer will be its supplier or another grocery company. The company also is asking that the process be moved along quickly.

Dahl’s said Monday that Kansas City, Kan.-based Associated Wholesale Grocers Inc. plans to buy Dahl’s assets and rebrand the stores. AWG is a retailer-owned grocery cooperative and grocery distributor.

Court filings show that AWG has offered to buy the chain’s assets for a base price of $4.8 million, which could be adjusted depending on the value of inventory and other items. Under one scenario, one of AWG’s co-op members could own the stores, with AWG funding the acquisition.
AWG said it plans to rebrand the remaining Dahl’s stores and remodel and update the properties. The new brand was not identified.

The Chapter 11 reorganization filing allows Dahl’s to continue to operate.

The bankruptcy filed Sunday in U.S. Bankruptcy Court in Des Moines listed 297 creditors, which included AWG, Des Moines, Ames and other cities, and former chief executive David Sinnwell. In the bankruptcy filing the company listed assets of $45 million and liabilities of $41 million.

According to court documents, Dahl’s has more than 950 employees and had $136.8 million in sales during the 12 months ending June 28. The grocer’s sales declined because of increased competition in the market and the company was “slow to recognize the competitive threat and to make the operational changes necessary to remain viable. During this period, the debtors over-leveraged their assets as their revenues declined and became undercapitalized,” according to court documents filed Sunday.

“Our intentions for entering into the agreement to purchase Dahl’s Foods are to provide an opportunity for a member of our cooperative to successfully enter the Des Moines grocery market, with some good locations, and to gain a strong and experienced workforce,” Jerry Garland, AWG chief executive, said in a statement.

AWG member companies include grocery brands Price Chopper, Thriftway, IGA, CashSaver, Apple Market, Country Mart and Sun Fresh stores. There has long been speculation that Dahl’s could become Price Chopper stores, which have locations in Missouri and Kansas.

Dahl’s has had a relationship with AWG since 2011 after it sold several properties to AWG and then leased the space back. Dahl’s still owns the properties at 8700 Hickman Road in Clive, 5003 E.P. True Parkway in West Des Moines and an East Euclid Avenue store in Des Moines. AWG also replaced SuperValu as Dahl’s chief supplier.

Dahl’s said the new company that emerges from bankruptcy will be a “stronger, more viable company,” according to a company statement. Dahl’s expects to continue business as usual during the bankruptcy proceedings, and customers should “experience no interruptions in service,” the company said.

The Chapter 11 reorganization and related filings show that although AWG has made an offer to purchase Dahl’s stores and inventory, the business will be put up for auction to see if there is a better offer, said Jeffrey Goetz, a Des Moines attorney representing Dahl’s. “If no one else is interested,” they would sell to AWG, he said.
Dahl’s has hired The Food Partners of Washington, D.C., to help market the company for the auction to get the maximum price for the company.

Dahl’s has also filed an emergency funding plan, which would be financed through loans from AWG, to assure that its employees continue to get paid and the company is able to bring inventory into the stores.

Dahl’s has closed three underperforming stores in the past five months and sold off properties in an effort to remain afloat. Dahl’s CEO Craig Moore, who came to the company in January, said it made more sense to make capital improvements to the company’s remaining 10 stores in Des Moines, Clive, Johnston and West Des Moines than to keep ailing stores operating.

“The current team at Dahl’s had commenced rebuilding this chain and we believe they have a good plan, but the financial position they found themselves in was just too big to overcome,” Garland said.

The company also told former workers in September that they would not receive scheduled retirement plan payments this year, leaving hundreds of retirees without money they had expected to receive. The company said its financial problems left it unable to make distributions from the company’s Employee Stock Ownership program.

In a bankruptcy situation, such plans are the last to be paid, after secured and unsecured creditors get their share.

Tags:  AWG, Dahl's, Dahl's Foods

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