Allens Gets New Owners After Bankruptcy

FILE PHOTO — An Allen Canning facility is located in Springdale. The company, which filed for bankruptcy, was recently bought by an out-of-state group.
FILE PHOTO — An Allen Canning facility is located in Springdale. The company, which filed for bankruptcy, was recently bought by an out-of-state group.

SILOAM SPRINGS -- Allens Inc. filed for Chapter 11 bankruptcy after more than 85 years in business, and the frozen and canned food company is now owned by an out of state group.

Sager Creek Acquisition Corp., owned by investment funds controlled or advised by two of Allens' creditors -- Sankaty Advisors LLC and GB Credit Partners LLC -- bought the company in February with a winning bid of $123.8 million. The total value of the deal is just shy of $160 million.

Bankruptcy Judge Ben Barry approved the sale in mid-February and Allens said in early March the deal had closed.

Allens filed for Chapter 11 protection in U.S. Bankruptcy Court for the Western District of Arkansas in late October. Court filings show that Allens owes its primary lenders $114.36 million and its secondary lenders $65.6 million. Chapter 11 allows a business to continue operating and reorganize its debts under court supervision.

Allens employs nearly 1,200 people across all of its U.S. operations. The company has operations in Georgia, North Carolina and Wisconsin in addition to its Siloam Springs plant and other Arkansas holdings.

Mark Weinsten, senior managing director for Boston-based FTL Consulting, a financial adviser to Sager Creek, told the court that under new ownership, Allens will be financially sound and intends to keep most of its employees.

Chris Kiser has been appointed the new chief executive officer of Allens. He has 26 years of experience in the food and consumer good industry working for companies including Campbell Soup, Diageo and Pinnacle Foods.

Allens, which is privately held, was established in 1926 and is a key player in the economy of Siloam Springs, on Benton County's border with Oklahoma. Allens is the third-largest employer in that area, behind McKee Foods Corp., the maker of Little Debbie snack cakes, and poultry processor Simmons Foods Inc.

Siloam Springs officials, including Wayne Mayes, president and CEO of the Siloam Springs, were relieved that the new entity had purchased the majority of the vegetable company's assets and not a Allens' competitor. Mayes said the deal means jobs at the headquarters, along with those scattered around the area, are likely safe.

Jonathan Hickman, chief restructuring officer of Allens, testified that Sager Creek has mechanisms in place to pay all valid claims the company owes under the Perishable Agricultural Commodities Act. The act regulates the sale of fresh and frozen produce to avoid unfair trade practices and to make sure that sellers are paid in a timely manner.

There were $19.18 million in claims made under the act, according to reports filed with the court by attorneys for Allens. The company had resolved $1.99 million in claims as of earlier this month, and the court dismissed others. The remaining claims, valued at $15.75 million, from 13 creditors will be considered in April by Bankruptcy Judge Richard Taylor.

Alvarez & Marsal, a global company which specializes in turnaround and interim management, is serving as the company's chief restructuring officer. Lazard Middle Market, a multinational advisory and asset-management firm, is its investment banker. The company's legal advisers are GreenBerg Traurig, LLP of New York and Mitchell, Williams, Selig, Gates & Woodyard of Little Rock.

Sankaty Advisors and GB Credit Partners were some of Allen's second-lien secured creditors. Second-lien holders have debts that are subordinate to more senior debt, often issued against the same collateral or a portion of the same collateral.

Sankaty Advisors manages more than $21 billion in assets and is a credit affiliate of Bain Captial LLC, which has more than $70 billion in assets under management.

GB Credit Partners is the investment management affiliate of Gordon Brothers Group, which originates, structures and invests in private-market debt. It specializes in $10 million to $50 million loans to middle-market companies. The group is invested in the consumer, commercial and industrial, financial services, intellectual property and real estate sectors.

Sager Creek has access to revolving credit of up to $80 million, a term loan of $32 million, $25.7 million in funding by affiliates of the Allens' second lien lenders, and $2.5 million from a major supplier.

Both Sankaty Advisors and GB Credit Partners have significant experience dealing with distressed companies and have access to capital if needed, Tim Tarvin of the University of Arkansas School of Law, who teaches bankruptcy and nonprofit law, has said. The investment in Allens shows both companies are confident that they can successfully make the shift from a credit position in the company to an equity position, he noted in an earlier interview.

The agreement to buy the company was reached after an auction was held for the majority of Allens' assets. The bidding started Feb. 3 and ran for four days. It involved four competing bidders and multiple rounds of bidding before a buyer was selected.

NW News on 03/23/2014

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