Snack Maker Hearthside Mulls Creditor Takeover in Bankruptcy

(Bloomberg) — Hearthside Food Solutions’ private equity owners are preparing to hand control to creditors, potentially as part of a bankruptcy filing, according to people with knowledge of the plans. 
The snack maker, which has been running out of room to repay its buyout debt after years of poor earnings, is in talks with creditors over a deal that would be carried out either in Chapter 11 or outside of the courtroom, said the people, who asked not to be named discussing private plans. 
No final decision has been made and negotiations are continuing. Hearthside has about $2 billion of debt due May of 2025, and has to repay what it borrowed from a credit facility next month. 
The company, run by a series of different private equity firms over the past decade, has been consistently burning cash since its latest buyout in 2018 by Boston-based Charlesbank Capital Partners and Zug, Switzerland-based Partners Group, according to a June report by S&P. Representatives for Hearthside and Partners Group declined to comment on the plans, while messages left with Charlesbank were not returned.  
Even after it sold assets including real estate, derivatives and certain European operations over the past year, Hearthside was left with dwindling liquidity and doubt about its ability to continue as a going concern by the time it announced its second-quarter results, according to some of the people.
Hearthside was named last year in a New York Times report that said the processor employed migrant children in plants in Grand Rapids, Michigan for work tending ovens to make Chewy and Nature Valley granola bars and moving heavy pallets of Lucky Charms cereal, among other jobs, all in violation of child labor laws. 
Company representatives didn’t comment to Bloomberg about that report, but Hearthside said in a statement published in Crain’s Grand Rapids Business in 2023 it has a strict policy against employing people under the age of 18, either directly or through agencies, and has changed procedures to ensure its policy isn’t broken again. It said it hired advisory firm KPMG LLP and law firm Paul Weiss, Rifkind Wharton & Garrison to review its practices. 
Hearthside’s roughly $1 billion term loan due in 2025 is quoted around 73.75 cents on the dollar, according to data compiled by Bloomberg, which also shows it has a $300 million second-lien term loan due November of that year.  
The company also produces snacks like protein bars and crackers, according to its website, as well as fresh and frozen foods. 
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