The Wall Street Journal reported on Friday, 15 November that Bumble Bee Foods will file a chapter 11 bankruptcy petition in the coming days.
Concurrent with the chapter 11 filing, London, U.K.-based private equity firm Lion Capital will put Bumble Bee up for sale, the WSJ reported, citing anonymous sources “familiar with the matter.”
Neither Lion Capital nor Bumble Bee responded to requests from the WSJ for comment.
Bumble Bee has struggled financially since it was penalized USD 25 million (EUR 22.8 million) for its part in a price-fixing scheme.
Lion Capital purchased Bumble Bee Foods from Centre Partners in 2010 for USD 980 million (EUR 886 million). It sought to sell Bumble Bee to Thai Union, the owner of the Chicken of the Sea tuna brand, for USD 1.5 billion (EUR 1.3 billion) in 2014 but the sale was nixed after U.S. authorities discovered evidence of price-fixing amongst the two companies and rival StarKist. Former Bumble Bee CEO is currently on trial for his own alleged role in the conspiracy.
Tangible signs the company is in dire financial straits first came as part of the imposition of a reduced penalty in the criminal case for price-fixing, when the the U.S. DOJ agreed to lower the amount of the criminal fine to USD 25 million (EUR 22.8 million) to protect the company from insolvency.
“In light of the financial information presented by Bumble Bee and its expert, the parties agree that Bumble Bee does not have the ability to pay a guidelines range fine,” the sentencing memorandum said. “As a result of information presented by the company, the parties agree that USD 25 million without interest represents the fine that Bumble Bee can pay without substantially jeopardizing its continued viability.”
In August 2017, Bumble Bee refinanced 100 percent of its debt, not long after its guilty plea in the criminal case. That didn’t stop it from entering into technical default in July 2019; however, its lenders agreed to a forbearance period. In the meantime, it hired consultancy AlixPartners LLP, investment bank Houlihan Lokey Inc., and law firm Sullivan & Cromwell LLP to assist it with its turnaround effort.
In August, Bloomberg reported Bumble Bee had again exceeded the leverage ratio it is allowed under the terms of its senior debt and was considering filing for a court-supervised restructuring under chapter 11.
Sure to complicate Lion Capital’s effort to sell Bumble Bee is an agreement the company signed with the U.S. Department of Justice that its criminal fine would rise to USD 81.5 million (EUR 72.6 million) if the company is sold. Additionally, the company still faces civil lawsuits stemming from the price-fixing scheme, and a separate class-action lawsuit over its “Dolphin-Safe” labeling claims.
