Private-equity-backed snack manufacturer Hearthside Food Solutions has entered bankruptcy proceedings in the United States, grappling with challenges in refinancing its mounting debt. The company, known for its frozen burritos and crackers, recently became embroiled in a child labor scandal, which further complicated its financial landscape. On November 22, Hearthside submitted voluntary petitions for prearranged Chapter 11 cases in the US Bankruptcy Court for the Southern District of Texas.
This decision follows the establishment of a restructuring support agreement (RSA) with its shareholders, aimed at “right-sizing” its balance sheet. The restructuring is expected to help Hearthside reduce its debt by over $1.9 billion while securing an additional $200 million in new equity financing upon exiting Chapter 11.
Hearthside emphasizes that the RSA will provide a substantial influx of equity capital, positioning the company for long-term growth in the competitive food and drink business. To maintain uninterrupted operations during the Chapter 11 proceedings, the company is seeking court approval for $300 million in debtor-in-possession (DIP) financing.
Interestingly, out of the planned financing, $150 million will derive from existing lenders. Once the court approves this financial strategy, Hearthside anticipates emerging from bankruptcy by the first quarter of next year. It’s important to note that its Interbake Canada operations are not included in this filing.
Since its acquisition by private equity firms Charlesbank Capital Partners and Partners Group Holding in 2018, Hearthside has operated with a network of 28 production plants, employing approximately 12,100 workers. CEO Darlene Nicosia stated, “With a sustainable capital structure and a significant infusion of new capital to fund our long-term plan, we will be well-equipped to enhance our leadership in the food manufacturing industry as we drive continued innovation and growth.”
The company has taken decisive measures to address previous challenges while fostering improvements in employee engagement and organizational culture. Specifically, Hearthside aims to deliver best-in-class products and services that meet customer expectations.
This latest development follows Hearthside’s announcement of closing a baked bars factory in Nashville, Tennessee, which affected 229 jobs. Additionally, a report from the New York Times last year alleged the employment of migrant children at its Grand Rapids, Michigan facility. In response, Hearthside stated that it was “appalled” by the allegations.
As the food and beverage industry trends evolve, Hearthside Food Solutions continues to navigate its financial challenges while aiming for a turnaround that aligns with consumer expectations and safety standards. Moreover, as part of the broader food and drink consumer trends, the company remains committed to fostering responsible business practices in its operations.
