Daily News: April 2, 2012

AFA Foods Files for Chapter 11; GE, BofA to Provide DIP Loan

AFA Foods (AFA) announced that, given recent changes in the market for its ground beef products and the impact of media coverage related to Boneless Lean Beef Trimmings (BLBT), it has determined that the best way to preserve value for its stakeholders is through an orderly sale of some or all of its assets. To ensure the most efficient sales process possible and to optimize the potential results for all parties, the company has decided to execute this sales process under the protection of the United States Bankruptcy Code.

AFA filed voluntary Chapter 11 petitions in the District of Delaware to obtain the essential financing necessary to preserve continuity, to the greatest extent possible, for its customers, employees and business partners while it continues discussions with potential buyers to secure the highest and best outcome for its businesses. To this end, the company has secured a commitment for $56 million in debtor-in-possession (DIP) financing from its current lenders, GE Capital and Bank of America, to fund its ongoing operations and expects to continue providing customers with the finest, safest, highest quality ground beef products throughout this process.

In conjunction with the filing, AFA filed first-day motions with the court to ensure the timely payment of employee wages and benefits, maintain its customers’ promotional programs and complete a smooth transition into operating under the protections of Chapter 11. The company expects to continue purchasing goods and services from its suppliers and to pay suppliers in the normal course for all goods and services delivered on or after today’s filings, while claims for goods and services delivered prior to the filings will need to be addressed through the Chapter 11 process. The company hopes to maintain as many of its supplier relationships as possible.

“As an industry leading ground beef processor, AFA Foods brings significant value to customers, suppliers and potential buyers based on our long-standing customer relationships, robust product offering and proven focus on quality and safety,” said Ronald Allen, interim CEO of AFA Foods. “We believe an orderly sale through Chapter 11 will allow us to unlock this value and provide a smooth transition for our employees, customers and other business partners.”

AFA Foods is advised in its restructuring by Jones Day, Imperial Capital and FTI Consulting.

AFA Foods is a processor of ground beef products in the United States, serving some of the largest foodservice and retail companies in the nation.