Bumble Bee loan default forces restructuring; Lischewski continues to fight price-fixing charges
San Diego, California, U.S.A.-based Bumble Bee Foods has defaulted on its major operating loan.
Bumble Bee has been in technical default since the end of March 2019, but its lenders have agreed to a forbearance period, allowing the company to continue its efforts to restructure itself to regain its profitability, according to the Wall Street Journal.
Bumble Bee has struggled to abide by the terms of the loan as it pays off a criminal fine and additional millions in civil settlements for its involvement in a conspiracy to fix the prices of canned tuna sold in the United States between 2011 and 2013. The U.S. Department of Justice agreed to lower the amount of the criminal fine to USD 25 million (EUR 22.8 million) to protect the company from insolvency.
Bumble Bee refinanced 100 percent of its debt in August 2017, after its guilty plea in the criminal case. At the time, it held a five-year, USD 200 million (EUR 169 million) asset-based revolving credit facility with Wells Fargo Capital Finance acting as the administrative agent, as well as a six-year, USD 650 million (EUR 550 million) loan with Brookfield Principal Credit as the administrative agent.
The company faces further financial constraints in the form of an agreement with the DOJ that its criminal fine will increase in the event it is sold.
“To prevent an unjust outcome whereby Bumble Bee receives a reduction in its criminal fine due to its inability to pay and then shortly thereafter is sold, thereby eliminating the inability to pay, the parties have agreed to an additional fine to be paid in the event of such a sale,” the documents said. “The government has an interest in preventing a defendant that has obtained a reduction in its criminal fine from reaping a windfall if the defendant is able to subsequently enter into a transaction that cures its financial infirmity.”
Representatives of Bumble Bee did not respond to a request made by SeafoodSource on 25 July for comment on the company's financial situation.
But according to the Wall Street Journal, the company has hired AlixPartners LLP, investment bank Houlihan Lokey Inc., and law firm Sullivan & Cromwell LLP to assist it with its turnaround effort. AlixPartners is a New York City-based consulting firm that specializes in improving the performance of companies facing financial distress.
Meanwhile, lawyers for the company’s former CEO, Chris Lischewski, who is taking a leave of absence as he fights a separate DOJ case against him alleging his involvement in the price-fixing scheme, have filed a host of requests to limit what is seen by the jury in the case.
The 13 individual motion in limine requests, which seek to exclude certain testimony from being heard during the trial, include:
- Details of the plea agreements between the DOJ and Bumble Bee and StarKist, one of Bumble Bee’s co-conspirators in the price-fixing conspiracy. Lischewski’s lawyers argue that jurors “would infer from Bumble Bee’s corporate plea the guilty of its former chief executive officer, Mr. Lischewski.” Without the ability to cross-examine the party that entered the plea, the defendant “is unable to probe the motivations for entry of the plea,” they argued. “This significantly undercuts the defendant’s right to have a jury’s verdict based only upon evidence that is presented in open court.”
- Any information about the Tuna the Wonderfish marketing campaign, launched jointly by Bumble Bee, StarKist, and co-conspirator Chicken of the Sea, or about Bumble Bee’s co-packing arrangement with Chicken of the Sea. “The co-packing arrangement promotes increased efficiency in the packaging of canned tuna, and is fully compliant with antitrust laws,” Lischewski’s lawyers wrote. “Certainly, it will be much more difficult for the government to convince the jury that a price-fixing agreement was reached through a series of phone calls involving different co-conspirators, where none of the phone calls involved all three companies, rather than through unequivocal, well-document, and legal business arrangements, such as the Tuna the Wonderfish campaign and co-packing arrangements.”
- Decisions by the three conspiring tuna companies to reduce the size of their tuna packaging from six ounces to five ounces, or pricing decisions made by the company prior to November 2010, when the government alleges the conspiracy began. Lischewski’s lawyers argue that each company came to those decisions independently of one another, as a result of competitive pressures.
- Any information regarding Bumble Bee’s handling or management of the pricing of salmon, sardines, or pouched tuna. “Evidence of competitor communications regarding the pricing of sardines, salmon, and pouched tuna has no bearing on any material issue in this case,” Lischewski’s lawyers wrote. “nor is there any evidence that communications regarding these other products ever amounted to any agreement to fix prices.”
- Any information regarding civil lawsuits covering Bumble Bee’s filling of its canned tuna. These so called “fish-fill lawsuits,” which alleged Bumble Bee underfilled its cans of tuna, were settled in August 2012 for USD 3.3 million (EUR ), without an admission of liability on behalf of Bumble Bee. Lischewski’s lawyers argue that those cases are “wholly unrelated to and pre-dates the charged conspiracy.”
- All communications between Lischewski and David Roszmann, the former chief operating officer of Chicken of the Sea. Lischewski’s lawyers argue their communications took place outside of the years the alleged conspiracy took place and that the government has not identified Roszmann as a conspirator.
- The details of an email between Lischewski and Walter Scott Cameron, the former Bumble Bee Foods senior vice president of sales. The conversation, which took place after Cameron agreed to provide information to the government about the conspiracy, is “irrelevant, misleading, speculative, and highly prejudicial,” according to Lischewski’s attorney, who called Lischewski’s comments in the conversation “equivocal and ambiguous.”
- Any details of an email sent to Lischewski from Tri Marine CEO Renato Curto, dated 8 August, 2012. “The Curto email has nothing to do with the government’s allegations of price-fixing, and instead discusses irrelevant issues,” Lischewski’s lawyers wrote.
- An anonymous letter, undated and unsigned, which allegedly contains allegations questioning Lischewski’s competence as CEO. The letter constitutes hearsay, according to Lischewski’s representatives.
- Any details of Lischewski’s financial circumstances, including his personal wealth, compensation, stock holdings, and lifestyle. “Evidence regarding Mr. Lischewski’s financial circumstances has no bearing on the supposed existence of an overarching price-fixing conspiracy or Mr. Lischewski’s alleged involvement in it,” his lawyers wrote.
- Details of Lischewski’s ownership of tuna-fishing vessels through a minority stake in the South Pacific Tuna Corporation. “Evidence regarding Mr. Lischewski’s ownership of the tuna fishing boats is not probative of whether Mr. Lischewski participate din the charged pric-fixing conspiracy,” his lawyers wrote.
- Any third-party testimony speculating as to Lischewski’s state of mind, knowledge, or intent. “The jury must draw its own conclusions based on admissible evidence – it is not for the government’s cooperating witnesses to draw those conclusions,” Lischewski’s attorneys wrote.
Also in recent filings, the DOJ has released a cooperation and nonprosecution agreement with John Sawyer, the former senior vice president of sales at Bumble Bee rival Chicken of the Sea. The document, which is dated from November 2018, suggests Sawyer may testify in the upcoming trial.
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