Allen Family Foods sets sale procedures; interim DIP loan approved

By Caroline Salls

Pittsburgh, June 10 - Allen Family Foods, Inc. requested court approval of the bid procedures for the proposed sale of substantially all of its assets, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

Mountaire Farms affiliate Seaford Milling Co. is the stalking horse bidder. Seaford has agreed to pay $30 million for the assets, plus an additional final inventory amount.

If Seaford is not the high bidder at auction, Allen Family Foods will pay it a $2.63 million break-up fee and reimburse up to $600,000 of its sale-related expenses.

Competing bids must exceed Seaford's offer by at least the amount of the break-up fee and expense reimbursement and a $350,000 initial overbid amount.

Subsequent bids at auction must be in minimum increments of $250,000.

According to the motion, the proposed sale to Seaford does not include 24 of the company's broiler growout farms and 3,437 acres of farmland, as well as other accounts receivable, insurance policies, unamortized loan costs, tax refunds and farm machinery and equipment.

However, Allen Family Foods said it will take bids for the "excluded assets" either as part of a separate sale or together with the other assets.

In addition, the company was granted interim access to $5 million of its proposed $22 million of debtor-in-possession financing from MidAtlantic Farm Credit, ACA.

The DIP facility allows new money advances of $14 million and does not have a roll-up component, according to the DIP financing motion.

Allen Family Foods said the lender is not obligated to advance more than $14 million under the facility unless it determines that the company's sale transaction will be completed in connection with any advances over that amount.

The DIP loan will terminate on the earliest of the Sept. 8 maturity date, the sale of substantially all company assets, termination of the commitment and dismissal or conversion of the bankruptcy case.

Interest will be Libor plus 750 basis points, with a 2.5% Libor floor.

Allen Family Foods will pay a 200 bps commitment fee.

The bid procedures hearing and final DIP loan hearing are scheduled for June 24.

Allen Family Foods, a Seaford, Del., poultry producer, filed for bankruptcy on June 9. The Chapter 11 case number is 11-11764.

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