💥New Chapter 11 Bankruptcy Filing - Rizo López Foods, Inc.💥
Bacteria sours cheese and sour cream producer's prospects, seeks relief in chapter 11
Continuing our ongoing resolution to cover smaller filings, on September 15, 2025, Modesto, CA-based Rizo López Foods, Inc. filed a freefall chapter 11 bankruptcy case in the Eastern District of California (Judge Klein). Founded in ‘90, the debtor produces ~40mm pounds annually of “… artisan-crafted, award-winning” cheeses and creams under the brands Don Francisco, Tio Francisco, and Rizo Bros. Historically, the debtor sold its products to an assortment of customers, including Walmart Inc. ($WMT), Whole Foods ($AMZN), and Sysco Corp. ($SYY), but for now, that’s not the case.
To tell that tale and why the debtor is in bankruptcy, here’s the eponymous founder, CEO, and first day declarant Edwin Rizo:
“Around late 2023, Hawaii state officials found listeria monocytogenes (‘Listeria’) in a random sample of Debtor’s aged cojita Mexican grating cheese (‘Cojita Cheese’) for sale, which triggered an investigation and recall. The Listeria discovered in Hawaii was also found in the Debtor’s plant and has been genetically linked to a 10-year outbreak of Listeria, the cause of which had eluded public health officials, and has been allegedly linked to 26 illnesses and two deaths.”
Apparently, the resident Rizo perro made one too many visits to the debtor’s facility.
Kidding. Per the National Library of Medicine (the “NLM”), “[l]isteria can be found everywhere, including your home, restaurants, and other places such as grocery stores and food processing plants.” While most people handle it just fine, it poses a risk for the usual quartet: pregnant women, young children, 60+ adults, and people with weakened immune systems.
Anyway, in early January ‘24, the debtor “voluntarily” recalled its cojita queso, which, a month later, was followed by the US Food and Drug Administration (the “FDA”) and the Center for Disease Control notifying the debtor that one of its products had been linked to a particular strain of the bacteria. Ergo, the debtor immediately suspended operations and recalled even more cheese. Then the agencies’ visits started. Here’s Secretary of Health and Human Services and brain worm host RFK, Jr. with the results:
Jiving with what the NLM said ☝️, listeria was found basically everywhere.
Over the following months, the US Department of Justice sought a permanent injunction against the debtor and the Rizo family to prevent them from producing food until they were in compliance with the Federal Food, Drug and Cosmetic Act, to which the debtor, Mr. Rizo, and another family member consented in October ‘24. And over the next half-year, the debtor worked to (i) get back in compliance, officially receiving approval to recommence food prep on May 19, 2025, and (ii) resolve customer, personal injury, and supply chain claims, albeit to no avail.* During the process, the Rizo bros poured cash into the debtor to keep the company afloat, remediate the factory, and restart ops.**
Even after receiving FDA approval, the debtor took additional steps and decontaminated its entire plant again before reopening, on a limited basis and subject to daily testing,*** on August 5, 2025.
But during that entire 16-months, the debtor wasn’t operating and wrote off $6.7mm in accounts receivable and $4mm+ in finished goods. The challenges don’t stop there either. The debtor believes its potential liability could exceed insurance coverage and it may be subject to governmental penalties. Specifically, the potential liabilities pile up to roundabouts $72.6mm, including the big kahuna: a March ‘24 complaint filed by customer Sargento Foods Inc. (“Sargento”) for goods purchased, asserting damages in excess of $59mm.
In addition to litigation claims, the debtor owes Wells Fargo Back (“WFB”) and Wells Fargo Equipment Finance (“WFEF” and together with WFB, “Wells Fargo”) ~$10.2mm in secured debt for various equipment and financing loans. During the bankruptcy, the debtor “… intends to continue operations, continue to hire employees, regain its customers’ confidence and trust, address the claims against it, restructure or refinance the debt with WFB and WFEF …,” concerning which, it’s actively engaged in discussions with lenders, “… and return to profitability.”
To finance the bankruptcy, Mr. Rizo and his brother Iván Rizo will provide a ~$3.8mm DIP loan ($3.2mm interim) junior to Wells Fargo’s security interests. The DIP bears interest at 10%, payable monthly, and doesn’t have any fees other than reimbursement of professional expenses.
The court held a 1.1-hour first day hearing on September 19, 2025, at which all relief was granted after consensually coming to terms with Wells Fargo and the US trustee and punting a few issues to the second-day hearing.**** Speaking of which, that is scheduled for October 8, 2025 at 11am PT and, prior to that, on October 3, 2025 at 3pm PT, the court will hold a status conference.
The debtor is represented by McCormick, Barstow, Sheppard, Wayte & Carruth LLP (Hagop Bedoyan, Garrett Leatham, Garrett Wade) as legal counsel and Stapleton Group as financial advisor. Sargento is represented by Quarles & Brady LLP (L. Katie Mason, Amelia Valenzuela) as legal counsel. WFB is represented by McGuireWoods LLP (Todd Dressel) as legal counsel.
*The debtor and various parties were supposed to mediate in Chicago in late July ‘25, but prior to its taking place, “… one of the largest carriers denied coverage … that the company was depending on to make mediation productive,” and the debtor was left without any option other than to file.
**The Rizo bros have invested $13.3mm into the debtor since December ‘18, but the timeline regarding the investments and the amounts ain’t disclosed. We aren’t sure what’s driving the use of that date; listeria wasn’t a known problem until late ‘23.
***Since reopening, one sample from a non-food contact area tested positive for listeria, which the debtor shrugs off as “… not unusual for a dairy facility.”
****The US trustee objected to the DIP’s carveout, which doesn’t pick up any costs of a chapter 7 trustee and is oddly subject to the DIP lien (but not the DIP superpriority claim), and payment of $65k/month rent owed to Rizo-family-owned landlords. Folks reserved on the carveout issues, and the Rizo family agreed not to take rent payments, until the final hearing.
Company Professionals:
Legal: McCormick, Barstow, Sheppard, Wayte & Carruth LLP (Hagop Bedoyan, Garrett Leatham, Garrett Wade)
Financial Advisor: Stapleton Group
Claims Agent: Donlin Recano (Click here for free docket access)
Other Parties in Interest:
Customer: Sargento Foods Inc.
Legal: Quarles & Brady LLP (L. Katie Mason, Amelia Valenzuela)
Prepetition Lender: Wells Fargo Bank, N.A.
Legal: McGuireWoods LLP (Todd Dressel)