Consumers are often disappointed when their favorite food brands disappear from store shelves after filing for bankruptcy and going out of business.
One of the most popular products to temporarily disappear was Hostess Brands, which in 2012 filed for bankruptcy, ceased operations, and went into liquidation.
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When news of Hostess's demise reached consumers, many people began stocking up on boxes of baked goods.
Related: Another major auto parts brand files for Chapter 11 bankruptcy
The company, which made Wonder Bread, Twinkies, Ho Hos and Ding Dongs, eventually sold out of its products and disappeared from stores for many months until JM Smucker in September 2012 agreed to buy the defunct company for about $5.6 billion.
More recently, major dairy company Borden Dairy filed for bankruptcy in 2020 and 2022, and Dean Foods filed for bankruptcy in 2019. Borden and Dean Foods sold their bankrupt businesses in 2020, but continued to operate.
Borden products can still be found in stores and labels for Dean Foods products, such as Dairy Pure, Land O'Lakes and Friendly's, can also be found in supermarkets.
And now Hearthside Food Solutions, a major manufacturer of various snacks and food products for distributors such as Mondelez Global, Kraft Heinz Foods and Pepsico, filed for Chapter 11 bankruptcy protection on November 22 with a restructuring support agreement that will grant 100% ownership. of the company to its first lien lenders.
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Hearthside Files for Chapter 11 Bankruptcy
Hearthside and 22 affiliates filed their petition in the U.S. Bankruptcy Court for the Southern District of Texas in Houston, facing $2.1 billion in looming maturities on their first lien revolver loan and first lien term loan in November 2024 and May 2025, respectively, according to a statement from chief restructuring officer Robert M. Caruso.
Related: Popular furniture chain closes stores in Chapter 11 bankruptcy
The Downers Grove, Illinois-based manufacturer listed between $1 billion and $10 billion in assets and liabilities in its petition, including $2.75 billion in funded debt obligations, $304.8 billion in lease obligations and about 164 millions of dollars in general unsecured debt.
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Hearthside's annual revenue has increased from $145 million in 2009 to $3.3 billion in the 12 months ended Sept. 30, 2024, according to court documents.
The debtor's largest unsecured creditors include US Bank NA, which is owed $364.8 million in 8.5% unsecured notes; Mondelez, owes $15.2 million; Kraft Heinz Foods owes $3.6 million; and Pepsico, owes 3.4 million dollars.
Hearthside cited operational challenges for its filing, including wage increases and inflation, industry headwinds, certain job issues and transitions, and likely adverse publicity from the U.S. Department of Labor's investigation into alleged labor law violations. child labor in 2023.
The debtor, owned by private equity firms Charlesbank Partners and Partners Group, executed a restructuring support agreement with its first and second lien term lenders to deleverage its capital structure to eliminate $1.9 billion of its debt and secure $200 million in exit capital. , according to a statement.
Hearthside seeks to obtain $300 million in debtor-in-possession financing from its first lien lenders, including $150 million in new money and $150 million in first lien loans converted dollar for dollar. The company has $212.9 million in cash on hand, which it hopes to leverage during its bankruptcy case by approving the use of cash collateral.
The first lien lenders will receive an $825 million first lien exit term loan and 100% of the equity of the reorganized company in exchange for their $2.1 billion in first lien secured claims.
Second Lien Term Loan claims, owed $300 million, will receive their pro rata share of $18 million, Senior Unsecured Note claims, owed $350 million, will receive their pro rata share of $21 million and general unsecured claims of about $164 million will receive their prorated share of $164 million. prorated portion of $2.4 million. All existing secondary lien rights, senior unsecured notes and general unsecured claims will be discharged.
The debtor expects to emerge from bankruptcy in the first quarter of 2025.
Founded in 2009, Hearthside operates 28 manufacturing facilities in 11 states that produce consumer packaged foods such as nutrition bars, baked goods, frozen and refrigerated foods, snacks and sauces. The company employs 12,100 workers.
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