Aurora Foods traded all the way up to 981/2 from the 91-92 level after the company announced that it is pursuing a prepackaged bankruptcy that includes paying back the bank lenders in full and a $200 million equity injection from J.W. Childs Associates. Lenders under the restructuring will receive $458 million in cash and about $197 million in new 10-year, senior secured notes.
One trader explained that the bank debt did not tick all the way up to par because a portion of the pay down comes in the form of notes. Aurora's existing $400 million of subordinated debt will be exchanged for a combination of cash and equity. The restructuring comes as the company decided to take advantage of a 30-day grace period on an $8.8 million interest payment due on its 83/4% senior subordinated notes last Tuesday.
Aurora Foods will raise the cash necessary to make good on its promise to its bank lenders and subordinated noteholders through the J.W. Childs injection as well as through a new $441 million bank deal, explained an Aurora spokesman. A decision on who will lead the new loan has not yet been made, he added. J.P. Morgan is the existing lead on the company's loan. In exchange for its investment, J.W. Childs will receive a 65.6% equity interest in the company. An official from J.W. Childs did not return calls by press time.
In a written statement, the company noted that it has been pursuing options to de-lever its balance sheet, which included anticipated asset divestitures in addition to working with a number of private equity firms for an injection of capital. Aurora received new financing in the form of $25 million of senior unsecured promissory notes from entities affiliated with Fenway Partners and McCown De Leeuw & Co. last summer, but the Aurora spokesman said to the "best of his knowledge" the pair did not make any proposals for additional financing this time around. Under the current restructuring plan, Fenway Partners and McCown De Leeuw will be treated as preferred stock holders, which will be given about $15 million of new common stock along with the common shareholders. Calls to officials at Fenway Partners and McCown De Leeuw were not returned by press time.