Fairway Market has denied a New York Post report that the beloved private equity-backed grocer intends to shutter all locations via Chapter 7 bankruptcy, but major changes for the chain seem to be in the offing. 

A slew of patrons, from home cooks to recipe-writing stars, were quick to bemoan the supposed loss of the tri-state area Fairway, which debuted as an Upper West Side fruit stand in the 1930s. It remains popular for providing high-quality yet affordable offerings—not an easy combination to find in Manhattan or the surrounding areas it operates in.

Dismay flooded social media following the report. "Please respect my privacy at this time," New York Times food writer Alison Roman wrote on an Instagram story featuring a headline purporting the rumored liquidation. Rep. Alexandria Ocasio-Cortez, meanwhile, shared her sadness on Twitter: 
 

But there's one problem: The story was incorrect, Fairway wrote in a press release on Wednesday morning. 

"Despite reports, Fairway Market has no intention to file for Chapter 7 or liquidate all of its stores. All 14 stores remain open for business, offering a complete range of high quality, specialty food products, and we look forward to seeing our customers and employees,” the statement said.  

A different form of bankruptcy, though, does appear to be in the cards. Fairway plans to file for Chapter 11 protection and begin seeking a buyer for its locations, according to reports. In a statement to the media, Fairway said it's eyeing a "value maximizing transaction that will provide for the ongoing operations of the store." Unlike a Chapter 7 filing, which Fairway already dismissed, a Chapter 11 filing would allow the business to keep its stores open as it restructures. Fairway did not immediately respond to an emailed request for comment. 

Private equity paranoia 

Fairway has endured its share of financial woes. Family-owned for more than seven decades, Fairway found private equity ownership in 2007 when Connecticut middle-market firm Sterling Investment Partners acquired the chain for about $150 million. Sterling pursued an expansion strategy that brought Fairway to the tri-state area suburbs—and in 2013, to the public markets. 

The stock exchange wasn't kind to Fairway. After losing money every quarter following its public debut, it delisted shares and filed for Chapter 11 bankruptcy protection in 2016. A consortium led by Blackstone's credit arm GSO Capital Partners then stepped in, acquiring Fairway and rescuing it from liquidation. 

Despite boogeyman fears, private equity-backed bankruptcies are declining. 2019 saw 110 PE-backed companies declare bankruptcy, down from 2016's decade-peak of 181, according to PitchBook data: 

 

That doesn't mean they're going away entirely. The demise of Shopko last year illustrates a recent high-profile example. Sun Capital Partners acquired the Wisconsin-based discount retailer for $1.1 billion in 2005 and saddled it with debt. The chain filed for Chapter 11 protection last January, and opted to liquidate its 360 stores—eliminating about 14,000 employees in the process. As politicians like Sen. Elizabeth Warren and Ocasio-Cortez frequently point out, private equity firms can still profit if their portfolio companies go bankrupt. In this case, Florida-based Sun Capital extracted management fees and almost $180 million worth of dividends from Shopko between 2007 and 2015. 

The situation also parallels Toys R Us2017 Chapter 11 bankruptcy that forced it to close roughly 800 stores and lay off around 33,000 employees a year later. After a 2005 take-private by KKR, Bain Capital and Vornado Realty Trust worth about $6.6 billion, the retail behemoth reportedly accumulated about $5 billion in debt.

However, Fairway devotees can breathe easy: it appears the brand's 14 locations are here to stay—for now, at least. 

Featured image via Spencer Platt/Getty Images News

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