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AFA Foods, the beef processor that filed for bankruptcy citing media coverage of a “pink slime” meat additive, probably won’t be able to repay senior creditors owed $138.1 million, a company lawyer said in court.
A plan to sell the company within three months is unlikely to raise enough money to pay off its first and second lien loans, the attorney, Tobias S. Keller, said today in court.
The hope to reorganize as an independent company “has dimmed,” Keller told U.S. Bankruptcy Judge Mary Walrath. The goal now is to complete a quick sale that will preserve as many of the company’s 850 jobs as possible, he said.
The company, based in King of Prussia, Pennsylvania, entered bankruptcy yesterday, listing assets of $219 million and debt of $197 million in Chapter 11 papers filed in U.S. Bankruptcy Court in Wilmington, Delaware.
AFA foods was forced into bankruptcy in part because of reduced sales and increased costs caused by media coverage of a filler that ground-beef processors sometimes add to their product. Celebrity chef Jamie Oliver is among food activists who dubbed the additive “pink slime.”
The beef industry calls the filler boneless, lean-beef trimmings, Keller said. It is produced by treating finely ground beef scraps with ammonia hydroxide to kill pathogens. U.S. Agriculture Secretary Tom Vilsack said March 28 that the product is safe to eat.
Keller said AFA used the product only when requested by its customers, which include restaurants and large grocery stores. The company also blamed increased competition that caused it to lose business from some of its key food service customers.
The case is In re AFA Investment Inc., 12-11127, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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