WALNUT CREEK — Del Monte Foods, a legendary provider of canned fruits and vegetables, has filed for bankruptcy and will scout for a buyer in a “strategic” quest to stabilize the company’s finances.
“All or substantially all of the company’s assets” will land on the sales block, Del Monte Foods stated in an announcement regarding the bankruptcy filing.
Del Monte Foods reported that it has $1 billion to $10 billion in debts and the same dollar amount range for its assets, according to the company’s court filing with the U.S. Bankruptcy Court in New Jersey.
“This is a strategic step forward for Del Monte Foods,” Del Monte Chief Executive Officer Greg Longstreet said.
Del Monte conducted what it indicated was a full evaluation of its strategic 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,” Longstreet said.
Certain Del Monte lenders agreed to provide the bankrupt food company with $912.5 million in financing to help the company get through the Chapter 11 process and the sale efforts, Del Monte stated.
The company was founded in 1886 and employs 2,780 people. Del Monte has four plants, two in the United States and two in Mexico.
“The Del Monte business has been a cornerstone of American grocery stores for more than 130 years.” Johnathan Goulding, Del Monte’s chief restructuring officer, stated in a court filing.
The company has been jolted by some macroeconomic factors of late, Del Monte stated in bankruptcy papers.
“While it is a pioneer in the food production and distribution sector, like many consumer packaged goods companies, Del Monte has experienced changing consumer purchase behavior and increased inflationary costs,” Goulding said in a declaration filed with the court.
Del Monte stated that it saw strong consumer demand for its goods in 2022 and 2023. The company increased its borrowing to meet that demand — and in anticipation of sharply rising demand in 2024.
Instead of rising in 2024, demand drooped last year, an outcome that squeezed the company’s finances.
“Unfortunately, consumer demand declined during fiscal year 2024,” Del Monte stated in court papers. “The company’s outsized production commitments caused it to incur increased promotional spending to move excess inventory, as well as incremental warehousing and logistics costs to manage the surplus inventory.”
Del Monte also faced internal pressures that arose from its debt.
“On top of the market-driven pressures, the company has been highly leveraged for a number of years, with an average balance sheet always exceeding $1 billion in funded debt,” Del Monte stated in the court filing.
Interest rate trends created additional problems for Del Monte.
“The sharp rise in interest rates in 2023 and 2024 increased the company’s annual cash interest expense to approximately $125 million,” Del Monte stated in the court filings. That jaw-dropping amount exceeded the company’s earnings before interest, taxes and other items.
