US: Banks give Tasty Baking reprieve but want sale or merger
Tasty Baking's lenders are forcing through a sale or a merger
Lenders to Tasty Baking Co. have given the under-pressure US baker a reprieve but have insisted the company is either sold or pursues a merger.
Tasty Baking said on Friday (14 January) that banks lending to the business had agreed to "defer all principal payments and credit-facility reductions" to the end of June.
The deal, however, was stipulated that Tasty Baking must "pursue consummating the sale or merger" of the business by 30 June.
Tasty Baking's management said two weeks ago that it would have to consider selling the business as financial pressures linked to volatile commodity costs and its new bakery hit the company.
The baker said the "sharp rise" in commodity costs and the fall into bankruptcy of US retailer A&P, a key customer, meant the baker was "currently experiencing extremely tight liquidity".
As well as announcing its new agreement with the banks on Friday, Tasty Baking said it had secured financing worth US$6.5m. Some $2m has been put forward by the PIDC Local Development Corp. and $1m from the local state government in Pennsylvania. Tasty Baking has also received $3.5m from what it described as "a group of accredited investors".
Tasty Baking president and CEO Charles Pizzi said the business was "pleased" to have secured the deals.
"We believe that the new funds will enable the company to manage cash flow and deal with its tight liquidity situation as the company continues its evaluation of possible financial and strategic alternatives, which, in addition to a possible sale or merger of the company, include the possibility of refinancing the company's long-term debt or raising additional capital," Pizzi said.
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