Tesco has put its US arm Fresh & Easy into backruptcy as it plans to sell the majority of its 167-store portfolio.

Fresh & Easy said yesterday that the filing for Chapter 11 protection in the US Bankruptcy Court “is simply the next step in the restructuring process” which will see the business change hands to a private equity firm led by billionaire Ron Burkle.

An affiliate of Tesco will lend Burkle’s private equity firm Yucaipa $120m to help fund the takeover of the chain under the deal agreed last month.

Fresh & Easy has debts of between $500m and $1bn according to its Monday court filing in Delaware.

Fresh & Easy said: “It’s business as usual as we continue the transition to new ownership.”

The bankruptcy will allow Fresh & Easy the flexibility to rejig its store portfolio and shed unprofitable locations, it is understood.

The filing allows Tesco to back out of leases before they conclude and auction off the brand’s assets, which are worth $100m to $500m, according to the LA Times.

Yucaipa would then be given first refusal to bid for the retailer in a November court auction via an affiliate.

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