By Dietrich Knauth
NEW YORK (Reuters) – Hearthside Food Solutions filed for bankruptcy protection on Friday, seeking to trim $1.9 billion debt and restructure its operations after investigations into child labor at factories where it made granola bars, breakfast cereal and snacks.
Hearthside said that it never knowingly employed underage labor in its facilities, and that it had cut ties with third-party staffing agencies and strengthened its employment practices after a February 2023 New York Times (NYSE:NYT) article reported that migrant children worked in unsafe conditions at Hearthside’s factories to make Chewy (NYSE:CHWY) granola bars and pack bags of Lucky Charms and Cheetos.
Hearthside denied allegations that its workplaces were unsafe, but said that the article led to “immediate and severe” consequences, including government investigations and scrutiny by the media and Hearthside’s customers.
Hearthside said that the investigations had not resulted in any fine, and that they were not the primary reason for the bankruptcy filing.
Hearthside, which is owned by private equity firms Charlesbank Capital Partners (WA:CPAP) and Partners Group, filed for bankruptcy in Houston, Texas bankruptcy court, seeking to complete a restructuring that will eliminate $1.9 billion in debt and secure $200 million in new equity investment.
The company’s lenders have agreed to support the restructuring and provide an additional $150 million bankruptcy loan, according to Hearthside.
“We have taken decisive action across our company to put our past challenges behind us, and are encouraged by the improvement we have already seen,” Hearthside CEO Darlene Nicosia said in a statement.
Hearthside will continue operations as normal during its Chapter 11 case, and it intends to emerge from bankruptcy by the first quarter of 2025. The company’s Interbake Canada operations are not part of the Chapter 11 filing.
Based in Downers Grove, Illinois, Hearthside employs over 12,000 workers at 28 facilities that supply baked foods, snacks, nutrition bars and food packaging services to customers in the food and snack industry.