THL, Goldman to lose equity with CTI Foods restructuring

  • THL, Goldman acquired CTI in May 2013
  • CTI filed for bankruptcy protection March 11
  • Firms turn over near full CTI control to first-lien lenders

After a near six-year hold, Thomas H. Lee Partners and Goldman Sachs are losing their equity in CTI Foods.

CTI, a food supplier that’s been in business for 35 years, on March 11 filed for Chapter 11 protection in U.S. Bankruptcy Court in Delaware. The move will reduce the Wilder, Idaho, company’s debt by more than $400 million, a statement said.

CTI said it had received commitments for $155 million in debtor-in-possession financing from its lenders, which it will use to pay down existing debt and fund operations during its Chapter 11 case.

Thomas H. Lee Partners and Goldman Sachs Merchant Banking Division acquired CTI in May 2013 for about $690 million, Moody’s said. Littlejohn & Co was the seller. THL and Goldman will see their equity canceled with CTI’s restructuring plan, bankruptcy documents said.

Formed in 1984 as SSI Food Services, CTI makes products like cooked sausage patties, fajita meat and Philly steak, which are used by quick-service restaurants, including sandwich, hamburger and Mexican chains. It employs about 1,900 people.

For 2018 CTI posted about $29 million in Ebitda on about $1.2 billion in revenue. Liabilities stood at about $655 million, court filings said.

With the bankruptcy, THL and Goldman are turning over near full control of CTI to its first-lien lenders, the Wall Street Journal said.

The top lenders, who are owed $347 million, are receiving 97 percent of CTI while second-lien, who are owed $140 million, are getting 3 percent, provided they vote in favor of CTI’s preferred terms, the story said.

Kent Percy, CTI’s chief restructuring officer, said in a declaration supporting the bankruptcy that declining sales, a pending interest payment and increased competition helped spur the bankruptcy.

He also partly cited CTI’s 2016 acquisition of Liguria Foods, which was financed with $25 million in loans, the WSJ said.

Liguria was supposed to expand CTI’s product portfolio to pepperoni and dry sausage. Only CTI discovered inefficiencies in Liguria’s business and the company invested “substantial resources” to improve the business, documents said. Liguria stopped sending payments up the corporate ladder to CTI last year, the story said.

THL and CTI declined comment.  Goldman could not be reached for comment.

Action Item: For more information, see Percy’s declaration supporting CTI’s bankruptcy.