Twitter Blue-Checks Blast “Private Equity Mutants” For Bankrupting Their Favorite Grocery Chain

The rose-emoji-loving twitter blue checkmarks love complaining about esoteric financial concepts that they don’t understand. But as the old saying goes, even a broken clock is right twice a day, and once in a while, even they get it right.

As the coronavirus spreads around the world and the Davos billionaire circle-jerk enters its second day, the professional outrage mob has instead chosen the bankruptcy as obscure NYC supermarket chain Fairway as the trending topic du jour.

David Roth, a former Deadspin writer who used his platform to mewl about the ‘evil’ Trump administration in a series of whiny diatribes, lamented that Americans haven’t already risen up and dismantled the private equity industry. Especially considering that the PE business model relies on buying companies and then dismantling, or bankrupting, them for a profit (though only a handful of private equity firms are truly that ruthless).

To be sure, Roth admits that the only reason he cares about Fairway going under is because it directly affects him, and all the other NYC media denizens who relied on the grocery chain.

It’s one thing that private equity destroyed my workplace and my job. Fair play, it happens. But private equity forcing Fairway into bankruptcy is really going to fuck my life up. This I cannot accept.

— David Roth (@david_j_roth) January 22, 2020

It sucks how housebroken and Stockholm Syndrome’d American culture is at this moment, but just accepting that every now and then profitable businesses are driven into bankruptcy by private equity mutants, quite legally and quite profitably for them, might be the worst of all.

— David Roth (@david_j_roth) January 22, 2020

Others made a slightly more nuanced point: The failure of Fairway isn’t so much an indictment of the private equity industry as a whole, but rather of the greed and incompetence of managers who drive a thriving business into bankruptcy.

In quiet awe of the private equity guys who managed to turn a handful of beloved and heavily trafficked supermarkets in the richest parts of the richest city on earth and somehow make them bankrupt and 175 million dollars in debt https://t.co/9HZrNH5NsG

— Tom Gara (@tomgara) January 22, 2020

Though bankruptcy can help firms cut their losses, and often allow them to escape with profits while sticking lenders with the bill, few would argue that turning a private business profitable and then either selling it to Amazon or taking it public would have been a more profitable strategy.

However, in an unexpected twist, Fairway issued a statement hours after the New York Post reported the bankruptcy disputing that it plans to file for Chapter 7 and liquidate its stores.

New —> FAIRWAY, the iconic NYC supermarket, says it has NO intention of filing for bankruptcy or closing stores.
Disputing today’s report in the NYPost. pic.twitter.com/lTpgXS4Q2l

— Clifford Levy (@cliffordlevy) January 22, 2020

Instead, the company said it soon plans to announce a “value-maximizing transaction” that will allow for the “ongoing operation” of all 14 of its stores.

New —> FAIRWAY, the iconic NYC supermarket, says it has NO intention of filing for bankruptcy or closing stores.
Disputing today’s report in the NYPost. pic.twitter.com/lTpgXS4Q2l

— Clifford Levy (@cliffordlevy) January 22, 2020

But one reporter pointed out that Fairway has a strong incentive to vehemently deny the report, since warnings about an imminent move to liquidate might spook the company’s vendors, prompting them to aggressively tighten credit restrictions.

the Fairway bankruptcy report & rebuttal is an interesting situation for a couple of different reasons

obviously there’s the PE thing

But also, these types of reports can actually precipitate (or speed up) a bankruptcy filing

— Alexandra Scaggs (@alexandrascaggs) January 22, 2020

The Post did hedge its reporting by claiming that rumors of a Fairway bankruptcy were circulating even amid “ongoing interest” in the Fairway brand by a potential rival. Any potential buyers are probably approaching with trepidation given Fairway’s massive $174 million debt load and its expensive leases, including a $6 million rent obligation for its flagship store.

If the company does move ahead with plans to enter restructuring, this would be Fairway’s second trip through bankruptcy, which is how the private equity firms gained control of the company in the first place.

So maybe those private equity guys aren’t so stupid after all. Either way, we suspect we will know soon enough, because even if Fairway does make it to liquidation, a more competent rival would likely end up buying all the assets and reopening the stores.