Madison Dearborn's Pierre Foods Goes Under
Oaktree Capital Management is providing a $35 million DIP financing facility to support the company's business operations.
July 15, 2008
Pierre Foods, a portfolio holding of Chicago private equity firm Madison Dearborn Partners, said Tuesday it has filed for bankruptcy protection.
The Chapter 11 filing in Delaware by the privately held Cincinnati-based prepared meats producer wasn’t a complete surprise. Pierre Foods, which had been slated to make a $6.2 million interest payment today, announced in early June that had it notified Wachovia Bank that it was not in compliance with its financial covenants.
Norbert Woodhams, chief executive of Pierre Foods, said because of increasing raw materials costs it was necessary to create a new capital structure for the company, as well as “streamline operations and right-size Pierre's cost structure” in order to avoid passing on higher costs to its customers.
Oaktree Capital Management, a Los Angeles private equity firm, is providing a $35 million debtor-in-possession financing facility to support Pierre Foods’ business operations while it restructures, pending court approval of the DIP credit facility. In connection with the bankruptcy filing, Pierre has retained to assist with its restructuring during the Chapter 11 process. Oaktree may also acquire an equity stake in the company through a debt conversion during the reorganization, according to Pierre.
Alvarez & Marsal is serving as Pierre's restructuring advisor in connection with the bankruptcy.
Madison Dearborn holds a 47.3% common stake in Pierre, its bankruptcy petition disclosed. The Chicago buyout group acquired its stake in through a leveraged recapitalization in 2004, according to regulatory filings. The buyout was supported by $125 million in senior subordinated financing, a $190 million credit facility and a $40 million revolver, as well as equity from Madison Dearborn and Pierre’s management team.
Two years after the deal with Madison Dearborn, Pierre carried out the $22.8 million acquisition of Clovervale Farms and the $94 million purchase of Zartic and its affiliated distributor, Zar Tran.
Pierre listed $349.4 million in assets and $441.2 million in liabilities in its voluntary petition. Its case filing number is 08-11469.
In early June, Pierre said it retained Perella Weinberg Partners to help with the evaluation of restructuring alternatives.
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