Canned-food producer Del Monte Foods files for bankruptcy
The firm entered a restructuring support agreement with lenders and started voluntary Chapter 11 proceedings to implement its terms, it said in a statement. It secured a commitment for US$912.5 million in debtor-in-possession financing, inclusive of US$165 million in new funding, from certain existing lenders.
A filing with the United States Bankruptcy Court for the District of New Jersey states that the company has both liabilities and assets estimated between US$1 billion and US$10 billion.
The development ends a challenging year for the borrower that saw its parent company Del Monte Pacific in June elect to skip a payment to the unit's lenders as part of a lawsuit settlement tied to a controversial debt restructuring.
Del Monte Foods said in its statement that the restructuring support agreement contemplates the company undertaking a going-concern sale process for all or substantially all of its assets. Financing along with cash from ongoing operations is expected to provide sufficient liquidity during the sale process and fund ongoing operations, as it intends to keep serving customers, according to the statement.
Del Monte Foods executed a debt overhaul last year, which became the subject of a lawsuit by left-behind lenders who said the company defaulted on a US$725 million financing agreement when it shifted the assets away from the reach of lenders.
The strategy – known in industry parlance as a drop-down transaction – allowed Del Monte Foods to raise fresh liquidity by borrowing against the transferred assets. The deal also prioritised participating lenders via debt swaps and created different payment priorities, Bloomberg reported. BLOOMBERG
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