Del Monte Foods Files for Bankruptcy, Seeks Buyer Amid Restructuring

U.S.-based canned-foods maker Del Monte Foods filed for bankruptcy in New Jersey on Tuesday and is looking to sell all of its business as part of the procedure.

The company has entered into a restructuring support agreement with a group of its lenders holding certain of the company's term loan indebtedness, it said in a statement.

The 139-year-old enterprise is currently under the ownership of Singapore-listed Del Monte Pacific Ltd. and is known for selling canned fruits and vegetables. It also owns College Inn, a premium broth and stock brand.

The bankruptcy of the U.S. company comes at a time when demand for branded packaged food has slowed in the country, as customers opt for private label products amid higher prices.

Packaged food companies such as Kraft Heinz (KHC) and Conagra Brands (CAG) are also taking a hit from customers who are now becoming more health-conscious and looking for food items that support a healthy lifestyle.

Kraft Heinz shares have fallen over 13% year-to-date, while Conagra stock has tumbled 24%.

Stocktwits data showed retail sentiment on Kraft Heinz has been ‘neutral’ over the past week, whereas for Conagra it has been ‘extremely bullish’ for the same period.

The broader S&P 500 Consumer Staples Index was up nearly 1% in premarket trading on Wednesday.

Del Monte Foods listed both liabilities and assets estimated to be between $1 billion and $10 billion on Tuesday, according to a filing with the United States Bankruptcy Court for the District of New Jersey.

It has also secured a commitment for $912.5 million in debtor-in-possession financing, inclusive of $165 million in new funding, from certain of its existing lenders, which is subject to court approval. 

"This is a strategic step forward for Del Monte Foods. After a thorough evaluation of all available options, we determined a court-supervised sale process is the most effective way to accelerate our turnaround and create a stronger and enduring Del Monte Foods," said CEO Greg Longstreet.

“With an improved capital structure, enhanced financial position and new ownership, we will be better positioned for long-term success,” Longstreet added.

Non-U.S. subsidiaries of Del Monte Foods are not included in the Chapter 11 proceedings and would continue to operate as usual, the company said.

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