By Dan Nakaso
SAN JOSE -- Mi Pueblo, the popular and colorful chain of family-grown Hispanic grocery stores, has limited options to re-emerge from bankruptcy protection and faces the possibility of having to liquidate its 21 stores and abandon its 3,260 employees, the company says.
In documents filed in federal bankruptcy court here this week, attorneys for Mi Pueblo asked Judge Arthur S. Weissbrodt to approve the company's plan to emerge from Chapter 11 bankruptcy protection on May 14 -- or it will have no choice but to liquidate the 22-year-old chain of stores.
Through February, Mi Pueblo had a net loss of $14.5 million, according to court filings first reported by the Silicon Valley Business Journal. Only one bidder, the Victory Park Capital investment firm, is offering enough financing to allow Mi Pueblo to erase its debts, emerge from bankruptcy protection and continue operating, the company's lawyers said.
"The plan submitted to the federal bankruptcy court this week positions Mi Pueblo well to move forward and to refocus on its core mission -- to provide our customers with authentic products and services that are of the highest quality and freshness," Mi Pueblo spokeswoman Perla Rodriguez wrote in an email to this newspaper. "While there is still work to accomplish in the near term, we remain very confident that we will emerge from bankruptcy as a stronger and better capitalized company.''
Mi Pueblo operates 15 stores in the Bay Area, three along the Central Coast and three in the Central Valley.
Mi Pueblo's flagship Story Road location on Thursday was bustling with customers pushing carts filled with items they can't typically find in mainstream grocery stores, several shoppers said.
Marivel Magana, 34, of San Jose, had a simple reason for her loyalty to Mi Pueblo:
"We are Mexican and they have many, many things for us Mexicans."
Mi Pueblo began in 1991 when founder Juvenal Chavez opened his first 5,000-square-foot store called "Country Time Meats" on Story Road in East San Jose. In 2012, Mi Pueblo had annual sales above $350 million, according to court records. But in the first six months of 2013, sales only grew 0.6 percent.
Also in 2012, the U.S. Immigration and Customs Enforcement Service conducted an audit of Mi Pueblo employees that resulted in the company firing 80 percent of its workforce, the court filing said.
When Mi Pueblo filed for bankruptcy protection in July, the company's attorney told this newspaper that Wells Fargo wanted to change the terms of its loans after it became concerned about Mi Pueblo's debt to credit ratio and its forecast revenues.
Wells Fargo did not immediately respond to requests for comment Thursday. But David J. Livingston, a supermarket research consultant from Milwaukee, said Mi Pueblo's problems likely run much deeper.
"Usually when companies blame outside vendors or financiers or whatever for their problems, it's time to look in the mirror," Livingston said. "If I was a lender, I would be leery about loaning money to the same people who made the decisions that got them into so much debt."
Bob Reynolds, a Moraga grocery business consultant, often takes his clients to the Mi Pueblo store in nearby Pittsburg. "It's the colors, it's the decorations, it's the music," Reynolds said. "It's a really fun place to shop. It's an ethnic experience to go in there."
If Mi Pueblo's restructuring plan gets rejected and it, indeed, decides to liquidate, Reynolds said eager competitors -- including some from Southern California -- will be waiting to snap up Mi Pueblo's store leases and merchandise at heavily discounted prices and will quickly fill the void.
But if Mi Pueblo successfully emerges from bankruptcy protection, other lenders and suppliers will be nervous about doing business with the company, Reynolds said. "Once burned, twice wise," he said. "That's a little flip, but if I were a vendor and I got burned by the same family, I'd be in the situation of, 'Show me the money.' Everyone knows the kinds of problems Mi Pueblo is having."
Contact Dan Nakaso at 408-271-3648. Follow him at Twitter.com/dannakaso.