As long expected, Bumble Bee Foods filed for Chapter 11 on November 21, 2019. The BDC Credit Reporter had first reported on the tuna manufacturer’s business and legal woes on July 22, 2019, when we placed Bumble Bee on our CCR 4 (Worry List). On two subsequent occasions we’ve mentioned the prospect of bankruptcy on August 10 and – most recently – on November 19, 2019.
With the filing, we’ve learned that the company has assets and liabilities of as much as $1 billion each, according to court papers. Furthermore “It has arranged an $80 million term loan from its current lenders and a $200 million revolving credit facility to keep operating while in bankruptcy, the documents showed“.
Bumble Bee is in litigation with the Department of Justice and has been pleading poverty to reduce fines owed, according to news reports: “The company flagged its financial distress at the time of sentencing, arguing the $81.5 million fine initially levied could push it into insolvency. The U.S. Department of Justice agreed, cutting the amount to $25 million and giving Bumble Bee an installment plan over several years that required no more than $2 million upfront“. Now that’s a deal.
Most importantly to the company’s lenders, Taiwan-based FCF Fishery has offered $925mn for the company as a “stalking horse” bidder. We don’t have a complete picture of Bumble Bee’s finances, and a full sales process will be required to ensure creditors get top dollar, but it’s an encouraging sign for the two BDCs (Apollo Investment or AINV and TCW Direct Lending) with $48mn lent to the company via its 2023 Term loan. That debt was valued at only a (7%) discount as of September 2019 by AINV. That’s the discount which the traded debt continues to be valued at when we just checked Advantage Data’s records. The FCF proposal “calls for paying down part of Bumble Bee’s existing first-lien debt“, according to the Wall Street Journal. In fact, we might see the lenders getting back 100 cents on the dollar once negotiations are complete. In either case, if the current valuation for Bumble Bee holds and other legal issues are resolved the lenders – notwithstanding this bankruptcy – might dodge a major credit bullet.