Forward Foods Files for Bankruptcy on Peanut Recall

NEW YORK (Reuters) – Forward Foods LLC, the maker of Detour energy bars, filed for bankruptcy protection on Tuesday after a tainted peanut recall by its supplier, Peanut Corp of America, forced the company to recall many of its own products on fears of possible salmonella poisoning.

Forward Foods, which makes high-protein, snack and meal replacement bars primarily under the Detour name, filed for Chapter 11 bankruptcy protection in Delaware, saying that a “significant” amount of its inventory must be condemned.

The company on Jan. 29 had voluntarily recalled all Detour bars that contained roasted peanuts from Peanut Corp.

A salmonella outbreak traced to one of Peanut Corp’s plants led to one of the biggest product recalls in U.S. history. The salmonella outbreak sickened 600 people, more than half of them children, and it may have killed nine people. The contamination has been traced to a Peanut Corp plant in Blakely, Georgia.

Sales of Detour products containing peanut product from Peanut Corp made up about 75 percent of Forward Foods’ protein bar sales, the company said in documents filed with the U.S. Bankruptcy Court for the District of Delaware.

The company sells its energy bars to health and fitness clubs as well as convenience and grocery stores.

Minden, Nevada-based Forward Foods is primarily owned by private equity firm Emigrant Capital Corp. It employs 52 people and regularly hires an additional 25 temporary workers, according to court documents.

It had both assets and liabilities of between $10 million and $50 million, it said in the filing.

Emigrant has agreed to extend $4 million in debtor-in-possession financing to Forward Foods to help to operate under bankruptcy protection, subject to court approval.

CIT Group/Commercial Services Inc (CIT.N) and Next Proteins Inc were listed among the largest unsecured creditors, according to court documents.

More than 1,800 products have been recalled since mid-January due to the outbreak, either because they were linked to Peanut Corp or because such links could not be ruled out.

Salmonella is an organism that can cause serious and sometimes fatal infections primarily in young children, the elderly and those with weak immune systems.

Peanut Corp filed for Chapter 7 bankruptcy on Feb. 13.

Under Chapter 7 bankruptcy, companies liquidate their assets to repay creditors. Under Chapter 11, companies try to reorganize while under protection from many creditor claims.

The case is In re Forward Foods LLC, US Bankruptcy Court, District of Delaware, No. 09-10545.

By Chelsea Emery
(Editing by Jeffrey Benkoe)