Hearthside Food Solutions, headquartered in Downers Grove, Illinois, has embarked on a transformative journey to strengthen its financial position and fuel long-term growth. The leading contract manufacturer of baked goods, snacks, and nutrition bars has entered into a Restructuring Support Agreement (RSA) designed to reduce its debt by $1.9 billion and secure $200 million in new equity capital. To implement these changes, Hearthside filed voluntary petitions for prearranged Chapter 11 cases in the United States Bankruptcy Court for the Southern District of Texas.

This strategic move comes as Hearthside faces the challenge of aligning its capital structure with its ambitious growth plans. The company, renowned for its extensive production network of 28 facilities and workforce of 12,100 employees, is also the largest private bakery in the industry. Since its acquisition in 2018 by Charlesbank Capital Partners and Partners Group, Hearthside has cemented its reputation as a premier provider of food manufacturing and packaging services to globally recognized brands.

Restructuring to support growth and innovation

Under the RSA, Hearthside will not only eliminate a significant portion of its debt but will also receive $300 million in debtor-in-possession (DIP) financing. This includes $150 million in new funds, which will enable the company to maintain seamless operations during the restructuring process.

Darlene Nicosia, Chief Executive Officer of Hearthside, remarked that the initiative marks a critical turning point for the company. She noted that with a more sustainable financial foundation and the infusion of new equity, Hearthside is well-positioned to enhance its leadership in the food manufacturing sector. She highlighted the company’s commitment to innovation, employee engagement, and delivering exceptional products and services to its customers as part of its long-term growth strategy.

Ensuring stability during Chapter 11

Hearthside has gained widespread support from its creditors and stakeholders, including majorities among its first lien lenders, second lien lenders, unsecured noteholders, and equity holders. The company has filed several “First Day Motions” with the court to ensure operational stability throughout the Chapter 11 process. These motions aim to safeguard employee wages, maintain customer programs, and uphold commitments to suppliers.

While the restructuring focuses on U.S. operations, Hearthside confirmed that its Canadian division, Interbake Canada, is not part of the Chapter 11 filing, emphasizing its robust performance and independence from the restructuring efforts.

A swift timeline for recovery

Hearthside aims to exit Chapter 11 in the first quarter of 2025, emerging as a leaner, more financially stable organization. The company’s leadership views this timeline as essential to maintaining momentum in its growth trajectory. With $200 million in new equity and substantial liquidity from the DIP financing, Hearthside plans to accelerate its innovation initiatives and strengthen relationships with its global customer base.

By strategically addressing its financial challenges, Hearthside is positioning itself as a resilient player in the competitive food manufacturing industry. Its focus on operational excellence and innovation promises to solidify its market leadership and drive sustained growth in the years to come.

  Chapter 11 restructuring, Charlesbank Capital Partners, food manufacturing, Hearthside Food Solutions