Fairway Group Holdings Corp. has gone bankrupt for the second time since 2016, overwhelmed by its lingering debt load and cutthroat price competition in the grocery business.

The iconic New York grocer filed for Chapter 11 bankruptcy early Thursday morning with an agreement to sell five stores and a distribution facility to Village Supermarket Inc., owner of the ShopRite chain. The deal, with a purchase price of about $70 million, will act as a so-called stalking-horse bid that sets a floor for other potential offers in a court-supervised auction, Chief Executive Officer Abel Porter said in a court declaration.

The company will continue to engage with potential suitors during the sale process and may enter into transactions for other stores, Porter said. Village Supermarket, whose ShopRite stores are predominantly located in New Jersey, was one of two stalking-horse bidders to emerge, Porter said. He didn’t name the other in the declaration.

Fairway enjoys iconic status in New York City, its traditional base, because of its wide selection of quality meats, cheeses and produce along with regular groceries at 14 stores. But it has struggled to bounce back from its 2016 bankruptcy -- the result of too much debt after a private equity buyout, and the advent of Whole Foods, Trader Joe’s and Fresh Direct.

Those rivals have nibbled away at Fairway’s dominance of gourmet and organic grocery sales. On the plus side for potential buyers, Fairway occupies prime locations in Manhattan and Brooklyn and has a loyal following of shoppers, with long lines that sometimes wind back into the store and the aisles.

But Moody’s Investors Service has said Fairway’s stores are too concentrated in one region and too close to each other, and its small overall size makes it hard to compete with bigger supermarket rivals. As the national chains expanded, Fairway began its own migration, opening stores in the suburbs of New Jersey, Long Island and Connecticut, where it goes head-to-head with price-chopping megamarkets. It defied speculation by keeping most of those suburban stores open after its first bankruptcy.

Nathan Glickberg founded Fairway’s forerunner in 1933 as a fruit and vegetable stand before the business settled into a storefront on Manhattan’s Upper West Side, according to the chain’s website. In the 1970s, Nathan’s grandson Howie added groceries and specialty foods to the offerings, as well as expanding floor space.

Fairway filed for Chapter 11 protection in 2016 after losing money in every quarter since its 2013 public offering. It emerged under control of its lenders, with debt reduced to about $84 million from almost $300 million. Fairway arranged another debt overhaul in 2018 with a five-year extension.

In court papers filed Thursday, Fairway listed liabilities of $100 million to $500 million and estimated assets in the same range. The Chapter 11 bankruptcy allows the company to keep operating while it works out a recovery plan.

Fairway put itself up for sale last year, when owners Brigade Capital Management LP and Goldman Sachs Group Inc. began soliciting bids. Blackstone Group LP’s GSO Capital Partners owned a large stake after Fairway left bankruptcy in 2016, but exited its position in 2018.