AFA Investment Inc. and its affiliates, including AFA Foods, American Foodservice Corporation, United Food Group, LLC, and American Fresh Foods (together “AFA”), one of the largest ground beef processors in the United States, have filed for Chapter 11 bankruptcy protection.
AFA cited growing negative publicity over the use of boneless lean beef trimmings (identified as “lean finely textured beef” or “pink slime” in some articles) as well as lower retail demand for beef products, costly product testing programs, and a change of customer base from foodservice to retail customers as events causing the filing.
Ron Allen, AFA’s Interim CEO, stated that the companies have hired an investment banker to market their assets and plan to idle their Los Angles, California processing facility this week. AFA reported consolidated booked asset value of $219 million against $197 million of liabilities. The companies currently have 850 full-time employees and operate facilities in Georgia, New York, Pennsylvania, and Texas, in addition to the California facility.
AFA requested approval of $60 million in “Debtor in Possession Financing” to be advanced by the companies’ current first-priority lenders. One lending covenant would require AFA to file a motion to sell all of the companies’ assets within the next 14 days. AFA also requested permission to continue to honor customer programs including rebates and returns, to pay certain “critical vendors” immediately, and to institute procedures for receiving and handling priority claims of vendors under the Bankruptcy Code.
The AFA bankruptcy follows news last week that other beef processors are reducing production in the wake of the furor and reported uncertainty in futures markets and auction prices.
Check back at the blog for additional information regarding the AFA bankruptcy as it becomes available.