Judge accepts Mi Pueblo reorganization plan

Grocer could emerge from bankruptcy in a matter of weeks

Mi Pueblo supermarkets received a thumbs-up from a federal bankruptcy judge on Wednesday, May 14, after he affirmed the company's amended Chapter 11 bankruptcy reorganization plan, Robert Harris, an attorney for the 21-store chain confirmed.

The plan allows the grocer to continue operating after it settled its financial differences with all but three of 29 creditors that had opposed the plan. Mi Pueblo could exit bankruptcy in the next few weeks to a month and will operate with normalized relationships with investors and suppliers, Harris said. An investor, Victory Park Capitol Advisors LLC will own 50 percent of the company, allowing the grocer to move forward with a healthy balance sheet, he said. No stores are expected to close.

"It is quite literally a new day for Mi Pueblo," Harris said.

Mi Pueblo San Jose, Inc. and its real estate company, Cha Cha Enterprises, filed for bankruptcy protection in U.S. Bankruptcy Court in San Jose on July 22, 2013, after the chain was out of compliance with a provision in its agreement with Wells Fargo Bank regarding profitability ratios. A federal immigration audit required Mi Pueblo to replace workers whose documentation was under review, which caused a substantial increase in payroll expenses, according to court documents. Prior to its bankruptcy filing, on May 25, 2013, Mi Pueblo owed workers more than $3 million in wages, taxes and benefits, and $1.5 million for time off and vacations, according to court documents.

Mi Pueblo's and Cha Cha's combined debts exceeded $36 million, according to court filings. In 2012, Mi Pueblo had more than $350 million in sales and owned substantial properties in Mountain View, Salinas and Watsonville through Cha Cha, according to court documents. It has $59.5 million in assets.

Under the plan, vendors entered into a minimum three-year trade credit plan where they agree to continue to supply goods. Mi Pueblo paid off its undisclosed debt to Wells Fargo Bank and transferred certain assets from Cha Cha Enterprises to Mi Pueblo, including its check-cashing business.

If Judge Arthur Weissbrodt had not accepted the plan, Mi Pueblo would have been forced to sell its assets, Harris said.

"We were very lucky to reorganize so quickly. This was really a very abbreviated process. We had a judge who was well prepared and got us through this process in a short period of time," he said.

Weissbrodt's ruling was an important moment in Mi Pueblo's history, Mi Pueblo spokesman Rolando Bonilla said in a statement on Thursday.

"After months of hard work and negotiations, we are thrilled to be closer to exiting bankruptcy. The outcome of yesterday's hearing will enable us to implement our restructuring plan and lead us toward a successful reorganization. We hope to share those plans with you soon. In the meantime, we would like to thank our vendors and creditors who have supported us during this difficult time and continue to collaborate with us to ensure a bright future for Mi Pueblo."

Three entities have not signed off on the plan: United States Trustee, Pacific Gas and Electric and NUCP Turlock, Inc. The latter company filed an amended objection to the plan claiming $11.5 million in damages after termination of a written lease for a 35,000-square-foot commercial property. But Mi Pueblo argues the claim exceeds the $1.3 million maximum that is allowable under bankruptcy code, according to court documents. The hearing will take place on June 10.

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Like this comment
Posted by Retired Teacher
a resident of Duveneck/St. Francis
on May 16, 2014 at 8:38 pm

Do the workers get their back wages, taxes, benefits, and other items? There's an entire story here that should be followed up!

Like this comment
Posted by Neal
a resident of Community Center
on May 17, 2014 at 6:35 am

I agree with Retired Teacher. I hope Mi Pueblo didn't get away with stiffing the employees.

Like this comment
Posted by Netghbor
a resident of East Palo Alto
on May 17, 2014 at 2:27 pm

Where is Juvenal Chavez now?

Like this comment
Posted by Cur Mudgeon
a resident of Greenmeadow
on May 19, 2014 at 11:04 am

Glad to see they will continue to operate--good market that serves a need in the community.

Sorry, but further commenting on this topic has been closed.

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