With no acceptable bid found by a deadline of Tuesday, EdgeStone Capital Partners portfolio company New Food Classics has ended up in receivership.
EdgeStone bought the hamburger patty maker about six years ago. The deal ran into trouble last year as beef prices soared and New Food Classics was unable to pass on price increases.
The company, which had received court protection from creditors, was seeking a buyer who would operate its food plants, as reported Tuesday. The hope was at least the banks could get some of their money back. (You can read that post here.)
However, the process failed to drum up a bid that was satisfactory to New Food Classics' main lender, Bank of Montreal BMO-T , by a deadline of Tuesday. The decision was made instead to put the company into receivership, according to a report by the bankruptcy monitor.
Local media in the Niagara region of Ontario and in Saskatoon, Saskatchewan, where the company had plants, reported that employees were locked out when they showed up for their shifts.
Three bidders said last week that they planned to submit final offers, according to the filings. Two were chosen to go ahead.
Meantime, a big customer was threatening to defect, and the company faced a recall of some meat it had sold.
One of the bidders withdrew, the monitor said. The remaining bidder's offer was at the low end of what the monitor said BMO could expect from a liquidation, and exposed BMO to more risk. After final talks failed, the decision was made to put the company into receivership.
According to the monitor's latest report, the board and management of New Food Classics resigned on Monday night.
"In light of the delivery of the Default Notice by BMO, the resignation of the NFCBoard of Directors and management, the lack of funding for NFC's business and the perishable nature of NFC's inventory, the Monitor is of the view that it is vital to have an immediate and orderly shut-down of the NFC manufacturing operations and a swift transition to a court-appointed receivership of the assets of NFC."
