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OAK BROOK, Ill. -- Five months after Brandon Barnholt, president and CEO of Clark Retail Enterprises Inc., said the company was financially strong and poised to pursue "acquisitions when we feel the deal is right," the Oak Brook, Ill.-based chain said it would seek bankruptcy protection to alleviate short-term debt.
Clark Retail, and its parent Clark Retail Group Inc., have filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company said the filing should ensure the continued flow of products to its stores and allow the chain to continue normal operations.
Excluded from the filing is Clark's White Hen Pantry Inc. subsidiary, which operates in Greater Chicago with approximately 250 outlets. Its exclusion from this filing allows White Hen's franchisees to continue operating as normal, and its vendors will be paid without interruption, the company said in a statement.
As part of its reorganization plan, Clark has received $56.2 million in debtor-in-possession (DIP) financing from its largest shareholder, Apollo Management L.P., to support operations and the payment of vendors and employees. "Our stores and offices will continue to operate without interruption. Our management team will remain in place and our company's commitment to provide customers with consistent quality, selection and great value remains unchanged," Barnholt said. "Our $56.2 million DIP should assure all of our vendors that we are committed to a continued supply of all post-petition goods and services."
Like the rest of the industry, Clark has been hurt by steep declines in gasoline margins, a weak economy, decreased consumer spending in the aftermath of September 11 and intense competition. "These unprecedented industry conditions created the need for the company to seek a Chapter 11 reorganization," the company said.
Clark Retail, which ranked 14th in the Convenience Store News list of Top 50 Convenience Store Companies, was the great consolidator of the Midwest, acquiring White Hen Pantry Inc., Wareco Services LLC and Minit Mart Foods LLC. In two years, the upstart retailer picked up 500 stores in eight deals, placing it among the elite c-store chains in the country with more than 1,300 units and $2.5 billion in annual sales.
But times have changed. Clark has been quiet the past 12 months as rivals Marathon Ashland Petroleum LLC, Alimentation Couche-Tard Inc. (ACT) and Krause Gentle Corp. step up their presence in the central United States. Moreover, many of Clark's suburban outlets are under increasing pressure as quick marts and gas pumps sprout in front of big-box competitors Costco, Dominicks and Meijer.
"The Chapter 11 process will provide us with the time and means to resolve its financial issues," Barnholt said. "This action will represent a new beginning that will allow a financially stable Clark to put the liquidity challenges of the past behind it, so that management can focus on operating the business and providing customers with even better levels of service and availability of product."