🥫New Chapter 11 Bankruptcy Filing - Del Monte Foods Corporation II Inc.🥫
'24-vintage LME falls flat and company ends up in BK anyway.
On July 1, 2025, CA-based Del Monte Pacific Limited (“DMPL”)-owned* Del Monte Foods, Inc. (“DMFI”), Del Monte Foods Corporation II Inc. (“DMFC”), and 16 affiliates (collectively, together with DMFI and DMFC, the “debtors” and together with their non-debtor subsidiaries, the “company”) filed chapter 11 sale cases in the District of New Jersey (Judge Kaplan). If you’ve ever visited a US grocery store (and aren’t Dr. Oz), you should already be familiar with the company’s offerings:
The company is a “… producer, distributor, and marketer of plant-based packaged food products …” and “… has been a cornerstone of American grocery stores for more than 130 years,” tracing its roots back to 1886 San Francisco.**
During the pandemic, like so many other businesses, the company experienced a big pop in business, so, again like so many others, it planned for that business to endure pretty much indefinitely and committed to high production volumes, funded by indebtedness, for its ‘23 “pack season” — the June through October period during which the company purchases inventory and packs products it then sells over the next 12-18 months.
The ‘23 pack season gamble paid off, so the company bet on ‘24 to be more of the same.
No, it was not.
Demand fell off as folks returned to the office, leaving the company with more canned veggies and fruit than it knew what to do with. To rid itself of excess inventory, it increased promotions and sold at a loss, while simultaneously paying additional warehousing and logistical costs to manage the junk it couldn’t move. Bundled with rising interest rates, which pushed annual cash interest expense to ~$125mm (more than the company’s current projected EBITDA), the biz was in a world of hurt.
Which brings us to its petition-date cap stack:
Well, not really. There’s a lot of build-up to get to those figures ⬆️. Backing up, in May ‘22, the debtors entered into a $600mm secured term loan to pay off $500mm in notes maturing in ‘25. A little less than a year later, in February ‘23, the term loan’s lenders threw in another $125mm to partially pay down the company’s then-existing ABL and increase the company’s commitments by the same amount, no doubt to fund the upcoming pack season.
But by then, things had already peaked, and in early ‘24, the ABL lenders reappraised their collateral, which resulted in lower advance rates and requests to impose additional reserves. In February ‘24, the company hired Alvarez & Marsal North America, LLC (“A&M”) and phoned up ordinary course counsel HSF Kramer (f/k/a Kramer Levin Naftalis & Frankel LLP)*** to help out. A couple of months later, in April ‘24, the ABL lenders and the company agreed to a standstill to allow the latter time to examine paths forward, for which the company also engaged PJT Partners LP ($PJT).
Following a quarter of path examination, in August ‘24, (i) the company, (ii) an ad hoc group of ‘22 term loan lenders (the “ad hoc group”),**** represented by Gibson, Dunn, & Crutcher LLP and Houlihan Lokey, Inc. ($HLI), and (iii) the ABL lenders, agented by JPMorgan Chase Bank, N.A. ($JPM) and represented by Simpson Thacher & Bartlett LLP and FTI Consulting, Inc. ($FTI), agreed on and executed a liability management exercise (the “LME”).
It gets complicated, so before we go on, here’s the post-LME org chart:
To kick the LME off, the ABL lenders agreed to amend the then-existing ABL facility to (i) provide a $125mm first-in, last-out bridge loan funded by the ad hoc group (the “FILO loan”) and (ii) create an unrestricted subsidiary, non-debtor DM Escrow Corp., to which the ad hoc group lent, in escrow, another $155m (the “escrow loan”).
Then, (i) DMFI cascaded substantially all of its assets down to DMFC and issued a super-senior-credit-agreement-governed first-out term loan to the ad hoc group in exchange for the FILO loan and the escrow loan, and (ii) the then-existing ABL facility was converted into the current ABL facility. Concurrently, DMFI repurchased the “… vast majority …” of the ‘22 term loan under “… open market and exchange agreements,” the consideration for which was the issuance of the second out term loans to the ad hoc group (at a 100% clip for backstopping the new money) and any other new money participants (with relatively more oppressive economics versus the first-out term loans) and, thereafter, third out term loans to non-new money lenders (with relatively more oppressive economics versus the first-out and second out term loans), which, at the end, left only $105mm of the ‘22 term loans outstanding (the “stub term loan”) and gave the company the liquidity it needed to make it through the ‘24 pack season.***** Notably and significantly, however, the company didn’t capture any discount in the LME process.
The holders of the stub ‘22 term loan weren’t thrilled that all their collateral dropped out of DMFI.
In the fall of ‘24, the holders, led by always friendly Black Diamond Capital Management (“Black Diamond”), replaced the admin agent under the ‘22 term loan, directed the new agent to declare events of default and exercise voting rights to replace DMFI’s board, and sued in Delaware’s chancery court.
After mucho litigation, including a trial and pre-and-post-trial briefing, and the company’s continued belief “… that the relief sought in the Complaint [is] meritless,” it nevertheless figured settling was probably better than losing or litigating the LME indefinitely in bankruptcy court and paid off the stub term loan holders in April ‘25 by borrowing another $122mm from first-out loan holders, backstopped by the ad hoc group.
For backstopping the pay-off, the ad hoc group received enhanced governance rights, which it used to appoint Brian Driscoll and Joe Hartsig to the board of debtor-parent Del Monte Foods Holdings Limited as “special directors” and reclassify Jon Weber, who had previously been appointed to the board by the ad hoc group, as one as well. The governance package also had the potential for bonus directors, based on whether DMPL contributed up to $45mm to repay those newly-borrowed funds. And when DMPL publicly chose not to, (i) the ad hoc group appointed Michael O’Hara and Giselle Everett in May ‘25,****** (ii) trade vendors clamped down on terms,******* and (iii) the company reenaged PJT — which had peaced out post-LME — and kicked off restructuring discussions with stakeholders.
Because the company didn’t have enough liquidity — after taking out Black Diamond and losing out on that sweet DMPL cash — to make it through the ‘25 pack season, another out-of-court restructuring was out of the question. But before the company submitted its bankruptcy petitions, it negotiated and signed up a restructuring support agreement (the “RSA”) with the ad hoc group, which currently holds 73.2% of the first out term loans and 61% of the second out term loans, and got the ABL lenders to agree to roll the prepetition ABL into a DIP ABL (full interim roll, total of $500mm in commitments).******** The RSA provides:
📍DIP Term Loan. A headline $412.5mm DIP term loan, composed of $165mm in new money ($100mm interim) and a $247.5mm roll-up of the pre-DIP-DIP first out term loans ($150mm interim), which will be (i) offered to all holders of first out term loans through a syndication process that, in order to participate, will require them to sign onto the RSA and (ii) backstopped by the ad hoc group. The DIP term loan carries interest at SOFR + 0.1% + 9.5% (1% cash, 8.5% PIK on the new money; all PIK on the roll-up) and features a 4% new money commitment fee (PIK) and a 10% new money backstop premium (PIK).
📍Credit Bid. Subject to agreeing on procedures, the ad hoc group will agree to serve as a stalking horse bidder and credit bid their claims.
📍Milestones.
Wow, is that all? Apparently. Like, this was coming for a long while, right, guys? What gives?
The court held the first-day hearing on July 2, 2025, at which all requested relief was granted — but not because no one took issue.
At the hearing, an ad hoc group of minority term loan lenders (the “ad hoc minority group”), represented by Dechert LLP (Alan Brilliant, Gary Mennitt), objected to the DIP term loan’s day-one roll-up of $150mm arguing it wasn’t appropriate and violated due process, as well as the fees, which, assuming the DIP remains outstanding for nine months, represents an internal rate of return of 35-38% to the ad hoc group. But Judge Kaplan’s probably bored this year and doesn’t want to disincentivize any future New Jersey filings, so he made short shrift of due process (lot of that going around these days), overruled the objection, and scheduled the second day hearing for August 4, 2025 at 10am ET.
The debtors are represented by HSF Kramer (Adam Rogoff, Rachael Ringer, Megan Wasson, Ashland Bernard) and Cole Schotz P.C. (Michael Sirota, David Bass, Felice Yudkin) as US legal counsel, Appleby as BVI legal counsel, A&M (Jon Goulding) as financial advisor and CRO, and PJT (Scott Mates) as investment banker. The ad hoc group is represented by Gibson, Dunn, & Crutcher LLP (Scott Greenberg, Jason Goldstein, Caith Kushner, Francis Petrie, Kevin Liang, Simon Briefel) and Sill Cummis & Gross P.C. (Andrew Sherman, Gregory Kopacz) as legal counsel and Houlihan Lokey, Inc. ($HLI) as investment banker. JPM, as prepetition ABL agent, and the ABL lenders are represented by Simpson Thacher & Bartlett LLP (Sandeep Qusba, Nicholas Baker, Dov Gottlieb, Zachary Weiner) and Greenberg Traurig LLP (Alan Brody) as legal counsel and FTI Consulting, Inc. ($FTI) as financial advisor. Wilmington Savings Fund Society, FSB, as DIP term loan magenta and super-senior credit agreement agent, is represented by ArentFox Schiff LLP (Jeffrey Gleit, Brett Goodman, Matthew Bentley). The ad hoc minority group is represented by Dechert LLP (Alan Brilliant, Gary Mennitt).
*Philippines-based DMPL acquired the company in ‘14 from Kohlberg Kravis Roberts ($KKR).
**If you find yourself in a non-US grocery store, there’s a decent chance you’re looking at Fresh Del Monte ($FDP) products. FDP and the debtors share rights to use the same, exact Del Monte® trademark, depending on the (at times, overlapping) geographic location and product offering in question. Obviously, that creates a lot of room for confusion, so on July 3, 2025, FDP issued a press release confirming, lol, that it ain’t in bankruptcy. We were, of course, curious to see whether this would cause any bankruptcy-related stock price dislocation: alas, the stock is up approximately 2% since the filing, sitting at $33.13/share as of July 3, 2025.
***The company has worked with Herbert Smith since ‘16.
****The ad hoc group’s members are AGL Credit Management LLC, Davidson Kempner Capital Management LP, Fidelity Management & Research Company LLC, Morgan Stanley Investment Management, Intermediate Capital Group, LLC, Silver Point Capital, L.P., Silver Rock Financial LP, and Silver Rock Management LLC.
*****During FYs ‘23 and ‘24, which ran May through April, the company also explored an IPO, but, for good reason, that never materialized.
******This Michael O’Hara is CEO and Managing Member at Consensus, a boutique investment bank focused on consumer-facing industries – not to be mistaken for Michael O’Hara, Managing Director at Jefferies Group, which, as far as we can tell, has no role in this case. In June ‘25, Jill Frizzley joined the board and is the sole member of its special investigation committee.
*******The debtors also stretched vendors to hell and back in the lead-up to filing. As of the petition date, they had ~$136mm in vendor payments outstanding.
********The DIP ABL carries interest at SOFR plus 0.1% plus 5.5% and carries a 0.35% upfront fee, payable at exit.
Company Professionals:
US Legal: Herbert Smith Freehills Kramer (US) LLP (Adam Rogoff, Rachael Ringer, Megan Wasson, Ashland Bernard) and Cole Schotz P.C. (Michael Sirota, David Bass, Felice Yudkin)
BVI Legal: Appleby
Financial Advisor and CRO: Alvarez & Marsal North America, LLC (Jon Goulding)
Investment Banker: PJT Partners LP ($PJT) (Scott Mates)
Special Investigation Committee: Jill Frizzley
Claims Agent: Stretto (Click here for free docket access)
Other Parties in Interest:
Ad Hoc Term Lender Group: AGL Credit Management LLC, Davidson Kempner Capital Management LP, Fidelity Management & Research Company LLC, Morgan Stanley Investment Management, Intermediate Capital Group, LLC, Silver Point Capital, L.P., Silver Rock Financial LP, Silver Rock Management LLC
Legal: Gibson, Dunn, & Crutcher LLP (Scott Greenberg, Jason Goldstein, Caith Kushner, Francis Petrie, Kevin Liang, Simon Briefel) and Sill Cummis & Gross P.C. (Andrew Sherman, Gregory Kopacz)
Investment Banker: Houlihan Lokey, Inc.. ($HLI)
Prepetition ABL Lenders and Administrative Agent: JPMorgan Chase Bank, N.A.
Legal: Simpson Thacher & Bartlett LLP (Sandeep Qusba, Nicholas Baker, Dov Gottlieb, Zachary Weiner) and Greenberg Traurig LLP (Alan Brody)
Financial Advisor: FTI Consulting, Inc. ($FTI)
DIP Term Loan Agent and Super-Senior Agent: Wilmington Savings Fund Society, FSB
Legal: ArentFox Schiff LLP (Jeffrey Gleit, Brett Goodman, Matthew Bentley)
Ad Hoc Group of Minority Lenders:
Legal: Dechert LLP (Alan Brilliant, Gary Mennitt)