Mega suppliers restrict deliveries

Mega store  photo: Eyal Yitzhar
Mega store photo: Eyal Yitzhar

Angel Bakeries CEO: If I don't give them bread tomorrow, they might as well close down.

After a long list of suppliers halted the supply of goods to the Mega chain yesterday, some also decided to halt the supply of merchandise to health-food sub-chain chain Eden Teva Market, the AM:PM supermarket chain, and the Alonit chain of convenience stores. The Mega chain controls Eden Teva Market with a 51% stake, while AM:PM is owned by Mega parent company Alon Holdings Blue Square - Israel Ltd. (NYSE: BSI; TASE: BSI). Sources inform "Globes" that Strauss Group Ltd. (TASE:STRS) notified Eden Teva Market, AM:PM, and Alonit today that it was immediately terminating its supply of merchandise. Soglowek also halted it supply of merchandise to the AM:PM and Eden Teva Market chains. Other suppliers that spoke with "Globes" said that they would also not supply goods to these chains. "If Alon Holdings Blue Square is unable to pay Mega's debts, then it won't pay AM:PM and Alonit's debts, either," one of the suppliers said. In general, the suppliers are extremely critical of the Alon group shareholders for hesitating to inject money into the chain, after withdrawing hundreds of millions of shekels in dividends over the years.

A long list of suppliers halted their supply of merchandise to the Mega chain yesterday, after the chain asked the court to summon a creditors meeting for the purpose of reaching a debt settlement. Mega owes NIS 1.29 billion: NIS 705 million to suppliers and the rest to the banks. As part of its court petition, the chain proposed that the suppliers agree to the postponement of payment of 30% of the debt for five years, which will be paid in 36 installments, and that the rest of the debt be spread over four payments.

While the large suppliers have credit insurance, most of the suppliers have no insurance, and can expect serious damage if Mega collapses. Mega gave the suppliers two alternatives: agree to an arrangement, and you may get your money in the future, or write all of the debt off now. The suppliers consulted lawyers yesterday, who told them that supplying any merchandise to the Mega chain in the coming days before the court makes its ruling is throwing good money after bad.

Missing shelves

Mega CEO Raviv Brookmayer tried to avoid a domino effect yesterday, and exerted pressure on suppliers, mainly on fresh produce suppliers, to supply merchandise. The pressure helped, at least in part. Tnuva Food Industries Ltd. and Strauss supplied goods to the Mega chain, albeit on a limited scale, and in accordance with an instruction from a credit insurance company. Angel Solomon Ltd. (Angel Bakeries) (TASE: ANGL) supplied its merchandise as usual, although Mega owes it NIS 9.4 million and has additional debts to an Angel Bakeries subsidiary. Osem Investments Ltd. (controlled by Nestl? SA (SWX:NESN)) (TASE: OSEM), which initially halted its supply of merchandise, said yesterday that it had obtained approval from the credit insurance company to supply some goods to Mega. Employees at Mega branches said that there had been shortages in recent weeks, and that although the chain was making orders, Tnuva was supplying only 20% of the orders. For its part, Strauss was supplying dairy products only, and to only a few Mega branches. Angel Bakeries CEO and controlling shareholder Yaron Angel said, "In our sales situation we don't have money to pay insurance. The dilemma of whether or not to supply merchandise exists, whether or not you have insurance. If we don't deliver bread to them tomorrow, they might as well shut the chain down."

"Globes": In your opinion, should the parent company sell off assets and inject money into Mega?

Angel: "Certainly. It's a question of the owners' responsibility. They are continuing their operations, and the question is what they want to do with this. If they pay the rescheduled debt, that's more respectable than making a haircut. The underlying arrangement is fair, before we heard how much they'll contribute. It depends on an injection by the owners, and on a plan that will enable the chain to make a profit again; otherwise, the chain will go on losing money and the supplier will lose more money on the goods he supplies."

Other suppliers who halted their supply of merchandise yesterday included Diplomat, Neto ME Holdings Ltd. (TASE;NTO), Unilever, Soglowek, and others. Other suppliers, such as Jafora-Tabori, reduced their supply of goods to a minimum in recent days. Employees at Mega branches are complaining that products are missing, and that "sales are plummeting."

Published by Globes [online], Israel business news - www.globes-online.com - on June 30, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Mega store  photo: Eyal Yitzhar
Mega store photo: Eyal Yitzhar
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