Ideal Protein of America makes Chapter 15 bankruptcy filing

By Sarah Lizee

Olympia, Wash., Oct. 6 – Ideal Protein of America Inc. filed Chapter 15 bankruptcy on Thursday in the U.S. Bankruptcy Court for the Southern District of Florida to gain recognition of its proceedings in the Superior Court of Quebec under the Companies’ Creditors Arrangement Act.

Martin P. Rosenthal, senior vice president of the company’s foreign representative, Ernst & Young Inc., said the company’s revenues decreased by about 53% in total from 2017 through 2022, and EBITDA declined by about 87%.

Rosenthal said this was due to a shortage of well-trained sales professionals, inadequate compensation programs to attract sales professionals, information technology system implementation issues at clinics operated by the debtors, a stale brand image, and the effects of the Covid-19 pandemic, among other things.

In September 2020, some of the debtors’ prepetition debt under a credit agreement matured. Despite a forbearance agreement and 11 subsequent amendments entered with some creditors, the debtors haven’t been able to implement a recovery plan for creditors in full.

Currently, the debtors owe more than $200 million in principal, interest and other costs to their funded debt creditors.

On Aug. 2, a syndicate of lenders, including Bank of Montreal and Federation des caisses Desjardins du Quebec, advised the debtors that they intended to debit and transfer about $17 million in excess liquidity to a new bank account opened in the name of the debtors, but ultimately controlled by Desjardins, one of the agents under the debtors’ prepetition credit facility.

The lenders initiated the transfer on Aug. 3, which left the debtors with only about $2.5 million to enable them to fund their ongoing operations during the Canadian proceedings.

The lenders provided additional funding of up to $4 million to allow the debtors to continue operating during the pendency of the Canadian proceedings.

The debtors continued to proactively engage with their stakeholders to assess all available strategic alternatives, but ultimately determined that it was appropriate to start the Canadian proceedings and after that, file the Chapter 15 cases.

Under an order entered on Aug. 25, the Canadian court approved a SISP, through which the company’s monitor may solicit offers to enter into one or more transactions for a sale of some or all of the company’s assets or business, whether or not the sale is a going-concern of the debtors, or reorganization of the debtors or their business.

The company hopes to close a transaction by Nov. 30.

Quebec-based Ideal Protein of America is a provider of weight loss protocol and associated nutritional products. The Chapter 15 case number is 23-18159.

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