H-Food Holdings and certain of its affiliates (Hearthside), a leading food contract manufacturer, has entered into a global Restructuring Support Agreement (“RSA”) with its key stakeholders that will right size the balance sheet, infuse the business with significant equity capital, and position the Company for significant long-term growth. To consummate the transactions contemplated under the RSA, the Company has filed voluntary petitions for prearranged Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas.
This restructuring will allow Hearthside to eliminate more than $1.9 billion of its debt and secure $200 million of new equity capital at exit, which will position Hearthside to best serve its customer base and position it for long-term growth.
“Today’s announcement marks an incredibly important step forward for Hearthside, our valued customers, and our dedicated team as we continue to transform our business for the future,” said Darlene Nicosia, Chief Executive Officer of Hearthside. “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. We have taken decisive action across our company to put our past challenges behind us, and are encouraged by the improvement we have already seen in our employee engagement, organizational culture, and ability to deliver best-in-class, quality products and services that our customers can depend on.”
Importantly, the Company enters this process with widespread support throughout its capital structure, including significant majorities of its first lien lenders, second lien lenders, and unsecured noteholders, as well as its equity holders. Hearthside has filed a number of customary “First Day Motions” with the Court to facilitate a smooth transition into Chapter 11 and operate without disruption during the process, including continuing to pay employee wages and benefits, maintaining customer programs, and honoring obligations to vendors.
To fund operations without disruption during the Chapter 11 cases, Hearthside has filed a motion seeking approval of $300 million of debtor-in-possession (“DIP”) financing, including $150 million of new money from existing lenders. Following Court approval, the Company anticipates this financing will provide ample liquidity to support its operations during the Chapter 11 process.
The Company intends to move through this process quickly and emerge from Chapter 11 in the first quarter of 2025. The Company’s Interbake Canada operations are not part of the Chapter 11 filing.
Ropes & Gray LLP and Porter Hedges LLP are serving as legal advisors, Evercore Group L.L.C. is serving as investment banker, Alvarez & Marsal is serving as financial advisor, and C Street Advisory Group is serving as strategic communications advisor to the Company.