Canned-food giant Del Monte Foods files for bankruptcy

Del Monte Foods, a well-known canned-fruit and vegetable producer, has filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of New Jersey. The company reported that it has both assets and debts estimated to be between US$1 billion and US$10 billion.

Filing comes after a controversial debt move

The bankruptcy filing comes less than a year after Del Monte Foods tried to fix its finances by doing what’s called a debt restructuring. In this process, the company moved some of its assets to a new place to borrow more money. This strategy, known in financial terms as a drop-down transaction, upset some lenders who were left out of the deal. Those lenders sued the company, claiming it had defaulted on a US$725 million financing agreement by putting certain assets out of their reach. The move also gave special priority to lenders who participated in the new deal.

Parent company skipped a payment

The situation got worse earlier this year when Del Monte Foods’ parent company, Del Monte Pacific, skipped a payment to the unit’s lenders in June. This was done as part of settling the lawsuit tied to the debt restructuring, further highlighting the financial stress the company was under.

To manage its financial troubles, Del Monte Foods has now signed a restructuring support agreement with its lenders. As part of this plan, the company intends to run a going-concern sale process—meaning it aims to sell most or all of its assets but still keep the business operating rather than shutting it down completely.

The company has also secured US$912.5 million in debtor-in-possession financing, which includes US$165 million in new funds. This money, along with income from daily operations, is expected to help the company stay open and continue supplying products to customers during the sale process.

Looking ahead

Del Monte Foods says it plans to keep serving customers and operating its business as usual while it works through bankruptcy and finds new owners for its assets. The company hopes this restructuring will help it handle its debts and move forward despite the recent challenges.

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