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Tritek International Inc. – U.S. Subsidiaries of Canadian Pork Leader HyLife File for Bankruptcy with $109mn of Funded Debt Citing COVID and Ill-Timed Acquisition; Will Continue Assets Sale Efforts as Windom, Minnesota Facility Faces Closure/1,000 Layoffs

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[Just filed. Developing story] April 27, 2023 – Tritek International Inc. and two affiliated debtors (the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case No. 23-10520 (Judge TBA). The Debtors, U.S subsidiaries* of Manitoba, Canada-based HyLife (a "vertically integrated operation for the raising, production and sale of pork products") are represented by Jeremy W. Ryan of Potter Anderson & Corroon LLP. Further Board authorized appointments include: (i) Katten Muchin Rosenman LLP as general bankruptcy counsel, (ii) PricewaterhouseCoopers LLP as financial advisors, (iii) Intrepid Investment Bankers as investment bankers and (iv) Donlin Recano & Company, Inc. as claims agent.

* Tritek International Inc is a holding company, with affiliated Debtors HyLife Foods Windom, LLC ("Windom") and Canwin Farms, LLC ("Canwin") each operating pork farms in the U.S. Of the two, Windom, Minnesota-based Windom is by far the larger (it has also been the most problematic, see "Events…, " below). Canwin is based in South Dakota.

The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn ($108.7mn of funded debt). Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Centimark Corp. ($1.1mn trade claim), (ii) Westrock CP LLC ($971k trade claim) and (iii) Robert W. Carlstrom Co. Inc. ($540k trade claim).

Goals of the Chapter 11 Filing

The Lazaruk declaration (defined below) provides: "…since the latter part of 2022, Debtors have undertaken a process to explore and consider viable alternatives and, more recently, have been working diligently to facilitate a smooth transition into chapter 11. Due to an extensive prepetition marketing and sale process, Debtors believe they are well-positioned to enter chapter 11 and pursue a sale of substantially of their assets pursuant to section 363 of the Bankruptcy Code, followed by an orderly wind down of Debtors’ business through a chapter 11 plan of liquidation."

For local coverage of asset sale efforts and the threatened shuttering of the Windom facility, see here, here and here.

DIP Financing

The Debtors have arranged DIP financing from their ultimate parents (see structure chart below) CPF Canada Holdings Corp., a Canadian corporation, and Itochu Corporation, a Japanese corporation (together, the “DIP Lenders”). Amounts and terms of the DIP financing have not yet been filed. According to the debtors, the DIP Lenders have provided $29.5mn of additional funding in the run-up to the Debtors' Chapter 11 filings.

Marketing Efforts

The Lazaruk Declaration provides: "In February 2023, Debtors’ management team, together with Debtors’ legal and financial advisors, determined that a chapter 11 process that would culminate in a section 363 sale was likely to be the best and most value maximizing path forward….On February 28, 2023, Debtors engaged investment banker Intrepid Investment Bankers LLC ('Intrepid') to assist in exploring all potential strategic options to prepare Debtors for a smooth landing in chapter Immediately, Intrepid started reaching out to potential buyers, both strategic and financial, with the goal of securing a party to serve as a stalking horse bidder (a 'Stalking Horse Bidder')….As of the date hereof, Debtors and their investment bankers have contacted over 115 potentially interested parties as part of this prepetition process, entered into 38 nondisclosure agreements, held one management presentations, and conducted two site visits….The extensive prepetition marketing process yielded a number of serious expressions of interest and has paved the way for Debtors to commence a chapter 11 process and pursue a sale of their assets pursuant to section 363 of the Bankruptcy Code. Although Debtors do not have a stalking horse bidder as of the date hereof, they anticipate that a competitive bidding process will ensue, and to that end, will be seeking approval of appropriate bidding procedures in connection therewith."

Events Leading to the Chapter 11 Filing

In a declaration in support of first day filings (the “Lazaruk Declaration), Grant Lazaruk, the Debtors' Governor, Chief Executive Officer and President of HyLife Foods commented: “HyLife acquired Windom from the Taylor Corporation ('Taylor') in approximately May 2020. Taylor, through GAT Farms, LLC ('GAT Farms'), operated a pork processing plant at the Facility [a pork processing facility in Windom, Minnesota since approximately 2016]….The COVID pandemic, which commenced shortly before the acquisition of the Facility, greatly impacted the processing and production of pork across the United States, with effects resonating throughout the pork supply chain. These effects included labor shortages, logistical restraints, market disruptions, and unfavorable foreign exchange pricing. Due to the unfortunate timing of HyLife’s acquisition of Windom in May 2020, Windom has incurred operating losses since its inception. On average, Debtors have incurred, and continue to incur, losses of approximately $6-7 million per month.

Prepetition Indebtedness

The Debtors are parties to:

(i) a May 6, 2020 "Prepetition Credit Agreement" by and among Windom and Canwin, as borrowers (together, the “Prepetition Borrowers”), Compeer Financial, PCA and Compeer Financial, FLCA, as co-administrative agents (together, the “Prepetition Agent”), and the other financial institutions party thereto and 

(ii) various Term Notes, dated as of May 6, 2020, various Delayed Draw Term Notes, dated as of May 6, 2020, and various Revolving Notes, dated as of May 6, 2020 (collectively, the “Prepetition Promissory Notes”)

As of the Petition date, the Prepetition Borrowers are liable for a total aggregate principal amount of $108,700,000 of funded debt, including (i) $69,400,000 on account of the Prepetition Term Loan, (ii) $17,000,000 on account of the Prepetition Delayed Draw Term Loans, (iii) $20,000,000 on account of the Prepetition Revolving Loans, and (iv) $2,300,000 on account of outstanding letters of credit, plus interest and other fees, costs, and expenses (collectively the “Prepetition Obligations”).

About the Debtors

The Lazaruk Declaration provides: "Debtors are three entities that are part of the HyLife vertically integrated operation for the raising, production and sale of pork products. The HyLife enterprise, with headquarters in Manitoba, Canada, has, since 1994, become a global company with over 4,000 employees and facilities across Canada, the United States, Mexico, China, and Japan. HyLife is one of the largest producers of pork in Canada and one of the top 40 pork producers worldwide by volume, exporting pork products to over 20 countries. It has two main divisions – live hog production and pork processing.

HyLife, Debtors’ ultimate parent company, was founded in 1994 in Southeast Manitoba by the Vielfaure brothers and Don Janzen, who worked together to achieve one common mission – create the most efficient, integrated operating structure for the production of hogs. Operations were expanded into the United States in 1998, and in 2008, HyLife purchased a processing plant in Neepawa, Manitoba to process all commercial hogs into pork products sold around the world.

HyLife acquired Windom from the Taylor Corporation ('Taylor') in approximately May 2020. Taylor, through GAT Farms, LLC (“GAT Farms”), operated a pork processing plant at the Facility (defined below) since approximately 2016. Today, just three (3) years later, Windom is a state of the art, professionally managed pork processing facility in Windom, Minnesota with the ability to process high volumes of pork product to service premium domestic and international end markets (the 'Facility'). Spanning 226,737 square feet, the Facility currently employs approximately 1,000 employees, approximately 450 of whom are foreign workers (who
are lawfully employed in the United States through the H-2B and TN visa programs), and has the capacity to process approximately 5,600 hogs per day. The Facility comprises eight processing lines, with overall production capacity of 415 hogs per hour, running 15.5 hours per day. The Facility’s capabilities include high grade hog processing, cooling and packaging. As of the Petition Date, the Facility runs two shifts. Once Debtors enter the chapter 11 process and in an effort to preserve liquidity, Debtors will downsize their operations. The Facility is expected to implement cost savings measures that will reduce the number of hogs that are processed beginning on or about the week of May 8, 2023.

Corporate Structure Charts (see Docket No. 13)

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The post Tritek International Inc. – U.S. Subsidiaries of Canadian Pork Leader HyLife File for Bankruptcy with $109mn of Funded Debt Citing COVID and Ill-Timed Acquisition; Will Continue Assets Sale Efforts as Windom, Minnesota Facility Faces Closure/1,000 Layoffs appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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