Del Monte Foods files for bankruptcy and will search for buyer
The nearly 140-year-old company is entering Chapter 11 proceedings as part of a restructuring support agreement (RSA) with its lenders.
"After a thorough evaluation of all available options, we determined a court-supervised sale process is the most effective way to accelerate our turnaround and create a stronger and enduring Del Monte Foods," Greg Longstreet, president and CEO of Del Monte Foods, said in a statement.
Del Monte did not immediately respond to CBS MoneyWatch's request for comment.
The canned-goods producer, based in Walnut Creek, California, said it has secured a commitment for $912.5 billion from its lenders that will help fund the company throughout the going-concern sale process and allow it to continue operating.
Del Monte has between $1 billion to $10 billion in both estimated liabilities, according to its court filing with the U.S. Bankruptcy Court for the District of New Jersey. The sale, the California-based company said in its statement, will involve "all or substantially all of the Company's assets." In its search for a new buyer, Del Monte said it would prioritize the highest or best offer.
Changing consumer preferences
Del Monte is the fourth company in the food & beverage sector to file for Chapter 11 according to data from Debtwire, a data analytics firm.
"Generally, Del Monte says that consumer demand has declined, causing it to incur increased costs related to surplus inventory that it has had to warehouse and attempt to move off shelves with increased promotional spending," said Sarah Foss, global head of legal and restructuring at Debtwire, in an email to CBS MoneyWatch. "Consumer preferences have shifted away from preservative-laden canned food in favor of healthier alternatives," she added.
The move follows a challenging few years for the company, which has issued layoffs and made efforts to downsize to cut costs. Del Monte last year started a debt overhaul, according to Bloomberg.
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