Del Monte Foods initiates bankruptcy proceedings in US: What went wrong with the business? Explained | Company Business News

The US chapter of canned food company Del Monte Foods filed for Chapter 11 bankruptcy proceedings in New Jersey on Tuesday under an agreement with some of its key lenders, the company said on July 1.

The company entered a restructuring support agreement with lenders, following which it started voluntary Chapter 11 proceedings to implement its terms, Del Monte said in a statement.

The canned food company has secured $912.5 million in financing to support itself through the proceedings, it added. Del Monte further said it intends to keep its operations running during the bankruptcy proceedings.

But why did Del Monte, a 135-year-old company, file for bankruptcy? Here are the possible reasons.

Mounting debts and controversial restructuring

Del Monte Foods executed a debt overhaul last year that put a stark reminder of its debt-laden past. The company attempted a Liability Management Exercise (LME) to restructure $240 million in debt.

However, the LME quickly became the subject of a lawsuit by left-behind lenders who said the company defaulted on a $725 million financing agreement when it shifted the assets away from the reach of lenders.

This legal battle, which was settled earlier this year, put a strain on Del Monte’s operations.

The company on Tuesday listed estimated assets and liabilities in the range of $1 billion to $10 billion, according to a filing with the New Jersey bankruptcy court. The number of creditors is estimated between 10,000 and 25,000.

Loss in business

Del Monte Pacific, the parent company of Del Monte Foods, reported little to no growth in sales in fiscal 2024, which was pegged at $2.4 billion— flat with the previous 12 months. EBITDA dropped 60% to $133.2 million year-on-year. It also turned into a loss-making company with net losses of 127 million, as compared to a profit of 17 million a year ago.

Diminishing demand

With changing times, the food industry has seen a shift in consumer behaviour. The demand for preservative-laden canned food, packaged juices and fruits and vegetables is slowly subsiding, giving way to a more health conscious society that likes its meals fresh.

This means that companies like Del Monte are seeing lack of demand, evident from its closure of a facility in Washington in June.

Del Monte Foods hosts names like canned fruits and vegetables brand Del Monte, College Inn, under which it sells broth and stocks, and tea brands like Joyba.