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Bumble Bee files for Chapter 11 bankruptcy protection, while selling most of its assets

Cans of Bumble Bee tuna

San Diego, CALIFORNIA — Faced with “significant legal challenges”, San Diego-based Bumble Bee Foods LLC, has filed for Chapter 11 bankruptcy protection at the federal bankruptcy court in Delaware, and the company has also entered into a purchase agreement with Taiwan-based FCF Co., Ltd to acquire Bumble Bee for $925 million.

Bumble Bee, maker of the Bumble Bee canned tuna product and a major competitor of StarKist Inc. filed for bankruptcy protection last Thursday, as the company faced mounting legal challenges including the federal investigation into the tuna can price fixing scheme, in which it has pled guilty to and was sentenced last year.

Another major legal challenge is the class-action civil suit by consumers and retailers in the US, against Bumble Bee, StarKist and other canned tuna producers in connecting with the price fixing scheme.

The bankruptcy filing comes weeks after the company established on Sept. 4th this year a Special Restructuring Committee to — among other things — reviewed and considered the financial and operational condition of the Company and its business operations, according to the company’s filing.

It also revealed that Bumble Bee and its affiliates previously entered into “certain restructuring support agreement”, on July 10th, which among other things, contemplated the company commencing filing for bankruptcy protection to restructure the business and for the company to obtain debtor-in-possession financing from its lenders.

Additionally, the company and its affiliates have “negotiated a sale of substantially all of their assets, subject to higher or better offers, to FCF Co., Ltd. or its affiliates.”

Therefore, it is the judgment of the Committee, that it’s desirable and in the best interests of the Company, its creditors, shareholder and other parties to voluntary petition for  Chapter 11 bankruptcy proceedings.

The court filing also includes the list of creditors who have 20 largest “unsecured claims” against the company and its affiliates.

The largest amount shown in the filing is $50.53 million owed to FCF Co., and described as a “trade debt”. The second largest is Bumble Bee’s $17 million fine reached with the US Department of Justice in the price fixing case. The company pled guilty and reached the settlement with USDOJ.

One of the creditors listed is Fiji-based Pacific Fishing Co. Ltd., for more than $479,461— which is considered a “trade debt”.

Pending legal challenge that has not reached a conclusion — with no final amount owed or to be paid by the company — is the pending class-acton case in the can tuna price fixing lawsuit at the federal court in San Diego.

Last Thursday, Bumble Bee announced that it has entered into an asset purchase agreement with FCF Co., Ltd., which has agreed to acquire the company’s assets for approximately $925 million.

“To facilitate the sale and reduce its debt burden caused by recent and significant legal challenges, the company has initiated proceedings” under Chapter 11 bankruptcy procedures at the federal court in Delaware, according to Bumble Bee’s national news release.

It also says that Bumble Bee has received new financing commitments from its existing lenders that will provide sufficient liquidity to fund the business through the closing of the sale.

“It’s been a challenging time for our company but today’s actions allow us to move forward with minimal disruption to our day-to-day operations,” said Jan Tharp, the company’s president and chief executive officer.

According to Bumble Bee, the FCF Co. will serve as the “stalking horse” purchaser for the sale process. And its bid will be subject to a court-supervised auction process designed to achieve the highest or otherwise best offer for the company’s business.

The transaction is expected to close within 60-90 days.

FCF Co., in an international news release last Friday, echoed Bumble Bee’s statement but didn’t provide the amount of the purchase agreement for the 120-year-old Bumble Bee.

“It has been a challenging time, but we believe strongly in the company, the executive leadership team, the employees, customer partners and vendors,” said FCF president Max Chou in the news release.

FCF Co. said its proposal is subject to a court-supervised auction process designed to achieve the highest or otherwise best offer for Bumble Bee. Furthermore, Bumble Bee expects to conduct such auction in January and, if successful, FCF intends to close the acquisition during the first quarter of 2020.