The loss-making U.S. unit of Del Monte Pacific Ltd. (DMPL) has filed for Chapter 11 bankruptcy protection and placed its assets up for sale as part of a rehabilitation plan developed in cooperation with its creditors. Del Monte Foods Corp. II Inc.—which produces well-known brands including Del Monte, Contadina, College Inn, Kitchen Basics, JOYBA, Take Root Organics, and S&W in the United States, entered into a restructuring support agreement with a group of lenders and began voluntary bankruptcy proceedings in the U.S. Bankruptcy Court in New Jersey.
The company has agreed with its creditors to sell "all or substantially all" of its assets to maximize value for stakeholders. "This is a strategic step forward for Del Monte Foods. 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," said Greg Longstreet, president and CEO of Del Monte Foods.
It is important to note that Del Monte Foods is separate and unaffiliated with Fresh Del Monte Produce, which operates independently as a global producer and distributor of fresh and prepared produce.
DMPL had previously decided to withdraw its support for its U.S. subsidiary. As a result, control of Del Monte Foods and its subsidiaries shifted to the lenders, who now hold majority control of the board. A 25% stake in the company has been transferred to the lender group.
To support the asset sale process and fund continuing operations—pending court approval—Del Monte Foods has secured a commitment for $912.5 million in debtor-in-possession (DIP) financing. This includes $165 million in new funding from some of its existing lenders. Alongside ongoing revenue from operations, the DIP financing is expected to provide sufficient liquidity during the sale process and support normal business activity.
DIP financing allows companies in bankruptcy to obtain new funding to continue operating while restructuring. These loans take priority over previous debt and equity claims, providing essential breathing room for companies in distress.
"While we have faced challenges intensified by a dynamic macroeconomic environment, Del Monte Foods has nourished families for nearly 140 years, and we remain committed to our mission of expanding access to nutritious, great-tasting food for all," Longstreet emphasized.
In a disclosure to the Philippine Stock Exchange, DMPL stated: "This court-supervised process enables the debtor to formulate a process to address the company's existing liabilities and related obligations, during which creditor debt collection efforts are generally halted by the imposition of a moratorium during the pendency of the proceedings."
Following the dilution of its stake, DMPL is now assessing the financial impact of deconsolidating Del Monte Foods from its group accounts. As of the end of January 2024, DMPL's net investment in the U.S. company was valued at $579 million, with an additional net receivable of $169 million owed to DMPL and its affiliates.
Source: Inquirer.Net
