How many Americans, for years did not have jobs due to a firm hiring people lacking proper immigration documents? In the case of a food company, Mi Pueblo, it was 80% of 3200 workers –more than 2500 Americans!
“Mi Pueblo Foods — one of the region’s largest employers — plans to emerge from bankruptcy as early as May, according to its Chapter 11 reorganization plan filed Tuesday. The reorganization plan also discloses for the first time that the company replaced 80 percent of its workforce, which was the subject of a 2012 federal immigration audit.
The San Jose-based grocer said it won’t close any stores, at least immediately. The claims of unsecured creditors — including food suppliers who in aggregate are owned millions — will essentially get wiped out, the plan shows.
Please—the company is now operating with those legally allowed to work—they could have been doing this all along. It took a bankruptcy for them to operate legally. How many others firms are waiting to be caught before they obey the law? This is the result of the refusal to enforce the laws by President Obama and his Attorney General.
Mi Pueblo to emerge from bankruptcy after replacing 80 percent of workers; no stores to close
Nathan Donato-Weinstein, Silicon Valley Business Journal, 4/16/14
Mi Pueblo Foods — one of the region’s largest employers — plans to emerge from bankruptcy as early as May, according to its Chapter 11 reorganization plan filed Tuesday. The reorganization plan also discloses for the first time that the company replaced 80 percent of its workforce, which was the subject of a 2012 federal immigration audit.
The San Jose-based grocer said it won’t close any stores, at least immediately. The claims of unsecured creditors — including food suppliers who in aggregate are owned millions — will essentially get wiped out, the plan shows.
Mi Pueblo, which sought Chapter 11 bankruptcy protection in July 2013, hopes to win approval of its plan from U.S. Bankruptcy Judge Arthur S. Weissbrodt on May 14, according to plans filed late Tuesday.
Mi Pueblo says the plan is the best chance it has for surviving and continuing to employ its more than 3,200 employees across 21 stores. Emerging from bankruptcy is also important because it allows Mi Pueblo to operate without having to obtain court approval on major and minor elements of its business.
Time is of the essence: To avoid shutting down, Mi Pueblo must post a $7.5 million letter of credit to support its worker’s compensation insurance policy by June.
Mi Pueblo did not provide comment at the time of this post.
According to the bankruptcy reorganization plan (and as previously reported by The Business Journal), Mi Pueblo and its bankrupt real estate and check-cashing arm, Cha Cha Enterprises, will receive a total of $56 million in exit financing from private equity firm Victory Park Capital. In a complicated transaction, Victory Park will provide $31.5 million to Mi Pueblo and $24.5 million to Cha Cha. In exchange, Victory Park will gain a security interest in all the assets of both companies, entitling Victory Park to a first-priority right to take them over should Mi Pueblo be unable to repay the loans. Victory Park will also receive a 50 percent equity stake in Mi Pueblo.
Cha Cha will take the other 50 percent interest, contributing assets such as its check-cashing business and releasing a claim against Mi Pueblo for various loans over the years worth about $14 million.
“The Debtor, Cha Cha, and (financial adviser) Piper Jaffray & Co. believe that the new capital infusions described above is currently the best measure of the Debtor’s value, best maximizes the value of the Debtor’s estate, and provides Mi Pueblo and Cha Cha with the best chances of a successful reorganization,” attorneys for Mi Pueblo said in a court filing on Tuesday.
David Taxin, a local real estate broker who is an expert in the grocery market, said he thought Mi Pueblo could emerge from bankruptcy protection and be successful.
“The numbers are really good for these guys; they tend to have a higher profit margin on these stores,” he said. “Now, they’ve got some Wall Street guys looking at their books. They’ll make it lean and mean and make it operate better.
“The fact that they’re not closing any stores tells you they’re obviously doing millions of dollars in business, or they would have shut down the crummy ones. That’s what you do in a reorganization.”
The plan potentially marks the beginning of the end of Mi Pueblo’s year of pain.
The company was founded by Juvenal Chavez with his wife in a 5,000-square-foot store he called Country Time Meats 23 years ago. It grew quickly over the years and developed a loyal following in the Latino community. In 2012, it had gross sales in 2012 of $413 million.
But Mi Pueblo ran into several problems: Sales suffered as the large-store grocery industry as a whole came under pressure in recent years. That was compounded by a federal immigration audit, which caused Mi Pueblo to terminate about 80 percent of its workers, according to a court filing Tuesday that disclosed the impact of the audit on the company’s workforce for the first time. Since filing for bankruptcy, Mi Pueblo has lost a net $14 million, according to court records.
“Mi Pueblo was forced to replace terminated employees with less experienced personnel who, until they have had 3-4 months of experience, are less efficient and less able to the needs of Mi Pueblo’s customers,” the attorneys said in a court filing.
As a result of Mi Pueblo’s declining profitability, Wells Fargo Bank declared Mi Pueblo and Cha Cha in default on various credit facilities.
In court records, Wells Fargo claimed it was owed $38.5 million in total. In February, Wells agreed to accept $36.1 million, court records show.
Unsecured creditors will not be so lucky. Under terms of the plan, these parties, mostly grocery suppliers, will be entitled to a share of $100,000. Collectively, they are owed more than $8 million.
A list of the 20 largest unsecured creditors includes Hayward-based Bay Area Seafood, which is owed $654,000; Modesto-based Yosemite Meat Co., which is owed $917,170; San Francisco-based Marquez Bros., which is owed $539,625; and Watsonville-based La Rosa Tortilla Factory, which is owed $629,334.
Mi Pueblo’s plan does not discuss how it will boost sales and regain shoppers. Grocery competition is intense in the Bay Area, with a growing presence by discounters such as Walmart Neighborhood Market. The grocery world has seen upheaval in recent weeks with the sale of Pleasanton-based Safeway, the nation’s second-largest supermarket chain, to private equity firm Cerberus for $9.4 billion.
Getting the plan approved quickly is crucial for Mi Pueblo. “The continuation of Mi Pueblo’s Chapter 11 Case, particularly if the plan is not approved by May 30, 2014, could result in a cessation of operations due to an inability to maintain Workers’ Compensation Insurance,” attorneys for Mi Pueblo wrote. “Without the exit Financing and New Money Commitment, Mi Pueblo does not have the full $7.5 million needed to collateralize the letter of credit required by Mi Pueblo’s insurer on June 1, 2014.”
Mi Pueblo is represented by San Jose-based Binder & Malter LLP. Cha Cha is represented by Sacramento-based Felderstein Fitzgerald Willoughby & Pascuzzi LLP.
