Tasty Baking reaches agreement on new financing

by Eric Schroeder
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PHILADELPHIA — Tasty Baking Co. has reached agreement for new public and private debt financing that includes $2 million from the PIDC Local Development Corp., $1 million from the Department of Community and Economic Development of Pennsylvania, and $3.5 million from a group of accredited investors. Additionally, the company has entered into an amendment to its credit agreement with its bank group led by Citizens Bank pursuant to which the bank group agreed to defer until June 30 all principal payments and credit facility reductions.

According to Tasty, the amendment also waived certain defaults, changed the maturity date to June 30, amended certain financial covenants and established additional covenants, including, among other things, imposing until June 30 minimum cash balances and prohibiting the payment of any dividends on the company’s common stock. The amendment also requires Tasty to pursue a sale or merger of the company by June 30.
In addition, the lenders for the company’s loans from the P.I.D.C. and the D.C.E.D., along with the landlords for the company’s leases at the new bakery and its office headquarters in Philadelphia, have agreed to defer until June 30 certain payments due under their loans and leases.

“We are pleased that we have secured this new financing and the amendments,” said Charles P. Pizzi, president and chief executive officer of Tasty Baking. “We believe that the new funds will enable the company to manage cash flow and deal with its tight liquidity situation as the company continues its evaluation of possible financial and strategic alternatives which, in addition to a possible sale or merger of the company, include the possibility of refinancing the company’s long-term debt or raising additional capital.

“As we pursue our options, we remain focused on operational efficiencies, growing the business and continuing to produce, distribute and sell Tastykake products to our customers and consumers.”

The new financing agreement comes a little more than a week after Tasty disclosed it was exploring strategic options to deal with financial difficulties, and the outgoing governor of Pennsylvania subsequently expressed interest in helping the company weather its problems.

The company’s stock, which plunged from $6.43 on Jan. 4 to $3.83 on Jan. 5, traded at a 52-week low of $3.78 on Jan. 14.

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