Hearthside Food Solutions, a major snack manufacturer embroiled in a child labour controversy last year, which is owned by private equity firms Charlesbank Capital Partners and Partners Group Holding, has filed for Chapter 11 bankruptcy, according to a report by Bloomberg.
The move comes after the food company failed to refinance significant debt. Hearthside, which produces a range of food products including frozen burritos and crackers, filed in a Texas court on Friday, listing assets and liabilities between $1bn and $10bn. Bloomberg had reported last week that a bankruptcy filing was imminent.
In a statement, Hearthside said it had reached a restructuring agreement with its lenders and equity investors to “right size” its balance sheet. As part of the deal, the company plans to shed over $1.9bn in debt and secure $200m in new equity once it emerges from Chapter 11 proceedings.
The company also requested approval from the court for $300m in debtor-in-possession financing to sustain its operations through the bankruptcy process, with half of that amount coming from existing lenders. Hearthside expects to exit bankruptcy by the first quarter of 2025.
Hearthside has been negotiating with creditors to potentially transfer control from its private equity owners, who acquired the business in 2018, to the company’s lenders, according to reports in October.
Last year, it faced public scrutiny after a New York Times report revealed that its processing plant in Grand Rapids, Michigan, employed migrant children. Although the company labelled the report as a “mischaracterisation,” it led to a US Department of Labor investigation.
In response, Hearthside hired KPMG and law firm Paul Weiss, Rifkind Wharton & Garrison to assess and improve its labour practices. A company spokesperson emphasised on Friday that Hearthside has never knowingly employed underage workers and adheres to federal regulations, adding that the company has significantly reduced its reliance on staffing agencies and temporary labour.
The company’s financial troubles were compounded by ongoing cash flow deficits and poor earnings. In June, S&P Global Ratings downgraded Hearthside’s credit rating further into junk status, citing the company’s “steep cash flow deficits” and its failure to secure additional borrowing under its revolving loan.
