Stock dives more than 9% after trading halt lifted US company has estimated liabilities and assets between US$1 billion and US$10 billion

 

[SINGAPORE] Del Monte Pacific (DMP) is expected to take a body blow from the failure of its US unit, as the latter accounts for a big chunk of its operations.

 

In a statement issued on Wednesday (Jul 2), Singapore- and Philippine-listed DMP said it would have to deconsolidate Del Monte Foods (DMF) from its accounts as it no longer controls the US subsidiary, which has filed for bankruptcy.

 

DMP in June elected to skip a payment to the US unit&rsquo s lenders as part of a lawsuit settlement tied to a controversial debt restructuring. This led to the lenders appointing a majority of DMF&rsquo s board members, and 25 per cent of DMP&rsquo s stake in DMF was transferred to them.

 

DMP said the loss of control over DMF led to the deconsolidation of the subsidiary from its financial statements. According to the parent&rsquo s annual report for FY2024, DMF&rsquo s US$1.7 billion of sales accounted for more than 70 per cent of DMP&rsquo s group sales. The group has been posting significant losses in its last few quarters

 

The group is currently assessing the financial impact of this change, noting that its net investment in DMF was valued at US$579 million as at Jan 31, 2025, with an additional US$169 million in net receivables from DMF and its subsidiaries. The impairment value will be finalised following an audit.

 

DMF entered a restructuring agreement with lenders and started voluntary Chapter 11 proceedings to implement its terms, securing a commitment for US$912.5 million in debtor-in-possession financing. This includes US$165 million in new funding, from certain existing lenders.

 

A filing with the US Bankruptcy Court states that the company has both liabilities and assets estimated between US$1 billion and US$10 billion.

 

DMF executed a debt overhaul last year, which became the subject of a lawsuit by left-behind lenders who said the company defaulted on a US$725 million financing agreement when it shifted the assets away from the reach of lenders.

 

The strategy &ndash known in industry parlance as a drop-down transaction &ndash allowed DMF to raise fresh liquidity by borrowing against the transferred assets. The deal also prioritised participating lenders via debt swaps and created different payment priorities, Bloomberg reported.

 

DMF said in a statement that the restructuring support agreement contemplates the company undertaking a going-concern sale process for all, or substantially all, of its assets. 

 

Financing along with cash from ongoing operations is expected to provide sufficient liquidity during the sale process and fund ongoing operations, as it intends to keep serving customers, according to the statement.

 

On the Singapore bourse, DMP shares resumed trading on Wednesday after a trading halt the day before. The counter fell to as low as S$0.058, following its return to active trading at S$0.061.