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 that disappeared temporarily was Hostess Brands, which in 2012 filed bankruptcy, ceased operations, and liquidated.
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When news of the demise of Hostess reached consumers, many people began stocking up on boxes of the bakery's products.
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The company, which manufactured Wonder Bread, Twinkies, Ho Hos, and Ding Dongs, eventually sold all of its products and disappeared from stores for many months until J.M. Smucker in September 2012 agreed to purchase the defunct company for about $5.6 billion.
More recently, major dairy company Borden Dairy filed bankruptcy in 2020 and 2022, and Dean Foods filed bankruptcy in 2019. Borden and Dean Foods sold their businesses in bankruptcy in 2020 but continued operating.
Borden products can still be found in stores and Dean Foods' product labels, such as Dairy Pure, Land O'Lakes, and Friendly's, can also still be found in supermarkets.
And now Hearthside Food Solutions, a major manufacturer of various snack and food products for distributors such as Mondelez Global, Kraft Heinz Foods, and Pepsico, on Nov. 22 filed for Chapter 11 bankruptcy protection with a restructuring support agreement that will hand 100% ownership of the company to its first-lien lenders.
Hearthside
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 impending maturities of its first-lien revolver and first-lien term loan in November 2024 and May 2025, respectively, according to a declaration from Chief Restructuring Officer Robert M. Caruso.
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The Downers Grove, Ill.-based manufacturer listed $1 billion to $10 billion in assets and liabilities in its petition, which includes $2.75 billion in funded debt obligations, $304.8 billion in lease obligations, and about $164 million in general unsecured debt.
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Hearthside's annual revenue has grown from $145 million in 2009 to $3.3 billion in the 12 months ending Sept. 30, 2024, according to court papers.
The debtor's largest unsecured creditors include U.S. Bank NA, owed $364.8 million in 8.5% unsecured notes; Mondelez, owed $15.2 million; Kraft Heinz Foods, owed $3.6 million; and Pepsico, owed $3.4 million.
Hearthside cited operational challenges for its filing, including wage increases and inflation, industry headwinds, certain labor issues and transitions, and adverse publicity likely from the U.S. Department of Labor's investigation into alleged child labor law violations in 2023.
The debtor, owned by private equity firms Charlesbank Partners and Partners Group, executed a restructuring support agreement with its first-lien lenders 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, which includes $150 million in new money and $150 million in converted first-lien loans on a dollar-for-dollar basis. The company has $212.9 million in cash on hand, which it hopes to tap during its bankruptcy case through approval of cash collateral use.
The first-lien lenders will receive a $825 million first-lien exit term loan and 100% equity in the reorganized company in exchange for its $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 pro rata share of $2.4 million. All existing second-lien, senior unsecured notes, and general unsecured claims will be canceled.
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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