Hearthside Food enters bankruptcy

February 2025 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

February 2025 Issue

H-Food Holdings LLC, the parent company of Hearthside Food Solutions, has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the Southern District of Texas.

The process will allow Hearthside to eliminate more than $1.9bn of its debt and secure $200m of new capital at exit, according to the company, which will position it to best serve its customer base and position it for long-term growth. The company’s Interbake Canada operations are not included in the filing.

Hearthside hopes to emerge from Chapter 11 in the first quarter of 2025 and to fund operations as it goes through the Chapter 11 process. The company filed a motion seeking approval of $300m of debtor-in-possession financing.

“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 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,” she added.

In the days following the company’s filing, Hearthside received interim or final approval on all of its ‘first day’ motions from the bankruptcy court. Among other customary relief, the court granted interim approval for the company to immediately access cash collateral, which will provide ample liquidity to support ongoing operations during the onset of the Chapter 11 process.

In addition, the interim relief granted by the court will enable the company to continue operating in the ordinary course of business for its key stakeholders, including maintaining its customer programmes, paying vendors for goods and services on a post-petition basis, and continuing to pay employee wages and benefits as usual.

“With strong support from our key financial partners and other important stakeholders, we look forward to moving through this process swiftly and positioning Hearthside for significant long-term growth,” said Ms Nicosia. “With the significant Court approvals received yesterday, we move forward well-equipped to operate in a business-as-usual manner during our cases as we continue delivering the best-in-class products and services our customers expect.”

The company’s ‘second day’ hearing was scheduled for 18 December 2024, where the company sought approval of a $150m new money debtor-in-possession financing facility to further support ongoing operations and final approval of the interim orders entered by the court.

Private equity (PE)-backed Hearthside has faced significant difficulties in refinancing its debt. The company recently reached a restructuring support agreement (RSA) with its shareholders, aiming to “right size” its balance sheet, it said in a statement. The RSA is expected to provide the company with “substantial” equity capital and position it for long-term growth.

Hearthside was acquired by PE firms Charlesbank Capital Partners and Partners Group Holding in 2018. It currently operates a network of 28 production plants, employing approximately 12,100 workers. In May 2024, the company announced the closure of a baked bars factory in Nashville, Tennessee, which affected 229 jobs.

Hearthside has also been embroiled in a child labour scandal in recent years. In 2023, it was alleged that the company employed migrant children at its Grand Rapids, Michigan, facility. In response, the company stated that it was “appalled” by the allegations and introduced a new “enhanced process” to ensure its employees are all over the age of 18.

Richard Summerfield