Over the past few months, the national media has devoted a significant amount of coverage to the topic of boneless lean beef trimmings (BLBT) or so-called "pink slime." In particular, the product has been slammed by celebrity chefs and other health experts as both unhealthy and inedible. In fact, the backlash has grown so strong that many grocery stores, school cafeterias and fast food chains have stopped using the product altogether -- a scenario that has now caused at least one producer to seek bankruptcy protection.
According to news reports, Pennsylvania-based AFA Foods Inc. -- which supplies beef to major retailers and fast food chains across the U.S. -- filed for Chapter 11 bankruptcy earlier this week.
For those unfamiliar with Chapter 11 bankruptcy, it typically entails a debtor proposing a plan of reorganization outlining how it will keep its business alive and pay off creditors over the course of time. It should be noted, however, that Chapter 11 may also be used as a mechanism for liquidation.
Here, AFA indicated in court documents that it intended to keep its business operations moving smoothly by pursuing the prompt sale of certain assets. It listed assets of $219.6 million and debts/liabilities of $197.3 million.
It's unclear whether the company will be conducting layoffs or permanently closing any of its seven nationwide facilities.
Interestingly, AFA also indicated in court documents that it was already struggling with increased competition and excess capacity when it was hit by the storm of negative publicity surrounding BLBT.
"This controversy has dramatically reduced the demand for all ground beef products," said Ron Allen, interim CEO of AFA. "Almost all retail grocery stores have succumbed to public pressure to reduce or eliminate the sale of products including BLBT, as well as public requests to prominently label products containing BLBT."
BLBT or pink slime is essentially beef scraps containing no fat that are treated with ammonium hydroxide to eradicate potential bacteria. The product has been approved as safe for consumption by the U.S. Department of Agriculture for nearly 20 years.
Industry analysts cite the failure of the meat industry to respond to reports about the potential health issues posed by BLBT as one of the primary reasons why companies like AFA are now encountering financial problems.
"They lost control of the message," said Jonathan Bernstein of Bernstein Crisis Management. "Perception is everything. If enough people perceive that something is wrong, it's wrong. Reassurances that something's safe from groups that are now distrusted are useless at this point."
Stay tuned for future developments from our San Antonio bankruptcy blog ...
Regardless of your financial situation, contact an experienced legal professional to learn more about your rights and your options under Chapter 7 bankruptcy or Chapter 13 bankruptcy.
This post is for informational purposes only and is not to be construed as legal advice.
The Los Angeles Times, "Ground beef processor files for bankruptcy, blames 'pink slime'" April 2, 2012
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