Bumble Bee Foods files for Chapter 11

February 2020 | DEALRFONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

February 2020 Issue

Bumble Bee Foods, the largest North American brand of packaged seafood, filed for Chapter 11 bankruptcy protection in November, amid criminal fines and civil lawsuits stemming from a federal price-fixing case.

The filing, according to a statement announcing the move, was done to facilitate the sale of the company’s assets to Taiwan-based FCF Fishery, its largest creditor, for about $925m. Bumble Bee is currently owned by Lion Capital, a British private equity firm, which paid $980m for the company in 2010. The company has arranged an $80m term loan from its current lenders and a $200m revolving credit facility which will allow it to keep operating while in bankruptcy.

Bumble Bee filed for Chapter 11 bankruptcy protection in Wilmington, Delaware, listing assets and liabilities of as much as $1bn each, according to court papers. In its bankruptcy filing, the company said it owes the Department of Justice (DOJ) $17m stemming from a 2017 guilty plea when it acknowledged price-fixing and forming a cartel with Chicken of the Sea and StarKist. Bumble Bee also still faces multiple class action lawsuits and litigation from companies that distribute and sell its products.

The company’s then-chief executive, Christopher Lischewski, was indicted and the company was fined $25m for its role in that conspiracy. Bumble Bee was initially fined $136.2m but when it was discovered that the company could not pay the fine without jeopardising the viability of the organisation, the fine was scaled down. The DOJ also allowed Bumble Bee to pay its fine via an instalment plan over several years that required no more than $2m to be paid upfront. Bumble Bee is also facing civil lawsuits related to price-fixing. Earlier this year, it confidentially settled with Sysco and US Foods.

Bumble Bee, much like the wider tuna industry, is also fighting against the declining popularity of packaged tuna. According to a 2016 report from the US Department of Agriculture, consumption of canned tuna has dropped 42 percent per capita over the last 30 years.

“It’s been a challenging time for our company but today’s actions allow us to move forward with minimal disruption to our day-to-day operations,” said Jan Tharp, president and chief executive of Bumble Bee. “We have an experienced leadership team in place and plan to transform our business in bold and innovative ways that will build a legacy worthy of our proud 120-year-old history. It is our clear intent that all US and Canadian operations continue uninterrupted. Employees will get paid, our customer partners can count on us to continue delivering outstanding brands and services, and vendors will be paid in the ordinary course of business.”

Under the terms of the deal, Bumble Bee’s Canadian affiliate, Connors Bros. Clover Leaf Seafoods Company (CBCLS), will be initiating proceedings under the Companies’ Creditors Arrangement Act (CCAA). As part of the CCAA, CBCLS intends to seek approval for the appointment of Alvarez & Marsal Canada Inc. as the Monitor to oversee the CCAA proceeding.

Going forward, FCF will act as a ‘stalking horse’ purchaser for Bumble Bee’s assets. Under a so-called ‘Section 363 sale’ in a bankruptcy, the seller must run a competitive sale process to ensure that the results are fair and reflect the best value for the assets in the market. Accordingly, FCF’s offer, which includes $275m in cash and $638.5m in debt, will be considered the leading bid during a court supervised auction process expected to last 60-90 days.

Bumble Bee was founded in 1899 by the Columbia River Packers Association, and introduced the Bumble Bee Foods brand of canned seafood in 1910.

Richard Summerfield