Some 18 months after filing for bankruptcy, New World Pasta Co. is preparing to emerge from chapter 11 protection.
The maker of dry pasta products faces a confirmation hearing on November 18 in U.S. Middle District Court in Harrisburg, Pa., on its proposed reorganization plan.
The plan calls for the issuance of 7.5 million shares of stock in the private company for two classes of creditors. The company also has received a commitment of $240 million in financing to provide working capital and to help pay other claims.
Cary Metz, senior vice president and general counsel for New World, said the company has experienced a "remarkable turnaround" during the course of the bankruptcy proceedings. It has left certain parts of the pasta business that were unprofitable and has focused on its branded products, he said.
New World markets pasta products under brands such as Ronzoni, Creamette, San Giorgio, Healthy Harvest and American Beauty.
It sought bankruptcy protection in May 2004 after encountering financial difficulties brought on by declining sales, an acquisition of Borden pasta products that tacked on more debt, and problems integrating a new software system that led to inadequate financial information for management.
Since the bankruptcy filing, the company has sold off manufacturing plants in Louisville, Ky., and Omaha, Neb., as well as operations in Italy.
The company operates plants in St. Louis, Winchester, Va., and Fresno, Calif. It also has a plant in Montreal, Canada.
The confirmation hearing will be held before U.S. Middle District Bankruptcy Judge Mary D. France. Objections are to be filed by November 7.
Metz said he believes creditors "feel comfortable with the plan" and have not filed any objections. "At this point, we do not believe they will."
Under the plan, three classes of creditors will be allowed to vote. Two of the classes will receive New World stock, with a group of secured creditors getting 85% of the 7.5 million shares and one class of unsecured creditors receiving the remaining 15%.
To help the classes decide how they should vote, New World has provided sales projections for five years. It expects sales growth of 4% this year, to slightly more than $300 million.
The company anticipates sales increases ranging from 3% to 3.8% in each of the following four years, and sales of nearly $350 million by 2009.
Sales growth is based primarily on its Healthy Harvest brand, a product that "is just doing gangbusters for us," Metz said. Through May, sales of the Healthy Harvest brand have increased 47% when compared with the same period last year.
The pasta industry has suffered through slumping sales in recent years due to the low-carbohydrate diet trend. To some degree, that trend has subsided this year, New World said.
Based on pounds sold, sales of dry pasta products declined 3.2% in 2003 and 3.6% in 2004. However, the category posted a 1.7% increase in sales for the first six months of this year, New World said.
