Bumble Bee Considers Bankruptcy to Ease Debt and Legal Costs

(Bloomberg) -- Bumble Bee Seafood LLC is considering a bankruptcy filing as one way to ease its financial burden, which stems in part from a 2017 guilty plea to federal price-fixing charges, according to people with knowledge of the plans.

The prospect of a court-supervised restructuring under Chapter 11 is among several options being evaluated, according to the people, who asked not to be identified discussing a private matter. One alternative would involve finding a buyer, but any suitor might have to deal with fallout from some of the legal proceedings that are still in progress, they said.

A representative for San Diego-based Bumble Bee declined to comment on the company's plans. Bumble Bee's owner, the London-based private equity firm Lion Capital LLC, didn't respond to a request for comment.

Risking Insolvency

Bumble Bee, which says it's the largest North American seller of packaged seafood, pleaded guilty in 2017 to conspiring with its competitors to fix and raise prices in the U.S.

The company flagged its financial distress at the time of sentencing, arguing it couldn't afford to pay a criminal fine of more than $25 million without risking insolvency. The Department of Justice agreed, cutting the amount from $81.5 million and giving Bumble Bee an installment plan over five years that required no more than $2 million up front.

Sale talks could be complicated by terms of the settlement, which stipulated that the fine would revert to the full $81.5 million if the company was acquired within five years. A new owner might also have to deal with publicity from legal action against its past executives that's tied to the price-fixing case.

Even with the reduced fine, Bumble Bee is now facing a liquidity crunch, according to the people. Class-action lawsuits related to the antitrust case increased its potential liability, and the company is also facing claims it mislabeled products as dolphin-safe. Tuna canners are under pressure to ensure that their fish are caught without netting and drowning nearby dolphins.

Lender Negotiations

On top of that, declining revenue in 2019's first quarter sent Bumble Bee's leverage ratio over the maximum allowed under the terms of its senior debt, a $650 million term loan due in 2023, one of the people said.

The company has been working on a plan to stabilize Bumble Bee with its lenders, who granted a waiver on that violation, the people said. Its advisers include Sullivan & Cromwell LLP and Houlihan Lokey Inc., the people said; neither firm commented on the current state of the talks.

Christopher Lischewski, the former president and chief executive officer, was criminally charged in May 2018 for his alleged involvement in price-fixing and is set to stand trial in November. Two other former Bumble Bee executives have agreed to plead guilty to the charges and will testify against Lischewski in his upcoming trial, according to court filings.

Lischewski has pleaded not guilty to the charges.

Lion paid $980 million when it bought Bumble Bee in 2010 from Centre Partners Management LLC. Four years later, in 2014, Lion explored its own sale of the company, attracting a $1.5 billion bid from Thai Union Frozen Products Pcl., the owner of competitor Chicken of the Sea.

That deal fell through after the Justice Department raised concerns that it would harm competition in the retail tuna market, and began an antitrust probe that led to the discovery of the price-fixing conspiracy.

To contact the reporter on this story: Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Nicole Bullock

©2019 Bloomberg L.P.