Tasty's lenders grant extension
Buoyed by another shot of state aid Friday, Tasty Baking Co. also won desperately needed relief from its banks, which gave the Philadelphia company until June to sell itself or refinance its debt.
Buoyed by another shot of state aid Friday, Tasty Baking Co. also won desperately needed relief from its banks, which gave the Philadelphia company until June to sell itself or refinance its debt.
The banks, led by Citizens Bank of Pennsylvania, also agreed to forgo debt payments by the maker of Krimpets and Kandy Kakes until June 30, a move that should help the company deal with a cash squeeze caused by production problems at the new $78 million bakery at the Navy Yard in South Philadelphia.
Tasty Baking said it received $6.5 million in new public and private financing, including $3 million in public money, which is in addition to $32 million in subsidized loans that helped pay for the new bakery.
The new round of public money includes $2 million from the Philadelphia Industrial Development Corp. and $1 million from the Pennsylvania Department of Community and Economic Development, the company said.
An additional $3.5 million came from a group of unnamed private investors, the company said.
Tasty had missed a Jan. 1 payment on $81.5 million in debt after it realized that annual cost savings from the new bakery had fallen $3 million short of expectations. The new plant was expected to provide money-saving efficiencies, but production problems have prevented that. The company also blamed soaring prices for flour, sugar, and cocoa.
The banks - Bank of America, Sovereign Bank, and M&T Bank, in addition to Citizens - had given Tasty until 2 p.m. Friday to devise a plan to avoid a default.
Tasty's shares have fallen about 40 percent since the company disclosed Jan. 5 it was in talks with lenders to amend debt covenants for the second time in less than a year, and to find more loans.
Under Friday's amended credit agreement, Citizens and other banks deferred until June 30 all principal payments, waived certain defaults, amended certain financial covenants, and established additional covenants, including imposing until June 30 minimum cash balances and prohibiting the payment of any dividends on the company's common stock.
Tasty's state and local public lenders and its landlord, Liberty Property Trust, have agreed to defer certain payments until June.
The deal also requires Tasty to "pursue consummating the sale or merger of the company by June 30."
Potential buyers, according to the speculation by analysts and former executives, include Bimbo Bakeries USA in Horsham and Flowers Foods Inc. of Thomasville, Ga., which had an informal agreement to buy Tasty in the early 2000s, according to two sources familiar with those talks.
Neither of those companies has commented on the speculation since Tasty said last week that it might have to find a buyer.
Tasty's president and chief executive, Charles P. Pizzi, known for his political connections from his earlier career in the Philadelphia Commerce Department and at the Greater Philadelphia Chamber of Commerce, declined to be interviewed.
He said in a statement: "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."
In addition to a possible sale, Pizzi said options included "refinancing the company's long-term debt or raising additional capital." Tasty, which makes snack cakes, doughnuts, and cupcakes, hired Janney Montgomery Scott L.L.C. to help with that process.
Shares closed at $3.87 Friday, a 52-week low, compared with the 52-week high of $7.74 on April 23.
