The black eyes keep coming for private equity firms. On Monday, Cerberus California Inc.-backed Western Nonwoven Inc. filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington, and on Tuesday, Madison Dearborn Partners LLC-supported Pierre Foods Inc. did the same in the very same court. These filings occurred while most PE-watchers were honing in on the expected large losses from private capital injections at mortgage lender IndyMac Bancorp.
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Cerberus California, a unit of Manhattan private equity firm Cerberus Capital Management LLP, stands an excellent chance of losing its entire 100% stake in Western Nonwoven, which mostly makes materials for mattresses. Los Angeles-based Cerberus California acquired its full ownership in even-then-struggling Western Nonwoven during a restructuring that was completed in June 2007. Cerberus California acquired the maker of nonwoven materials that fill mattresses from a PE firm out of court last year before it decided to restructure in court on Monday.
Madison Dearborn purchased Pierre Food's for $422 million in June 2004, investing $142 million of equity, according to regulatory papers. The buyout was partly financed with a $150 million term loan, a $40 million revolver and $125 million of senior subordinated notes. But it failed to make a debt payment on June 30, putting it in default. That's all it took for the bankruptcy drums to start beating.
One PE firm that avoided the wreckage, somewhat, is Code, Hennessey & Simons LLC. The Chicago PE firm had bought a full stake in the mattress maker in late 1999 but decided to bail out in favor of Cerberus California during the 2007 restructuring. - Terry Brennan
See TheDeal.com: Pierre Foods defaults on payment
Bankruptcy Insider : Letter from Delaware: June 16, 2008
