Money has become more expensive due to rising interest rates.

A bankruptcy filing comes with risks. Many Chapter 11 filings include a potential resolution.

In the documents filed with the bankruptcy court, the company shares a plan that it hopes to enact. Sometimes that includes notification that a bid has been made for the distressed assets.

Related: Popular food brand files Chapter 7 bankruptcy, heads to liquidation

As we have recently learned with chains like Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops, having a Chapter 11 plan does not always mean that a company survives.

In those three cases, the retailers were hoping to find new financing and get some relief from their vendors. That did not happen due to a combination of factors.

Currently, every company that files Chapter 11 bankruptcy faces a difficult market to raise money. Cash has gotten expensive due to higher interest rates. That has made banks more cautious and vendors have been less willing to extend credit to companies that can’t get cash to back up their orders.

That has led a number of companies that might have survived a Chapter 11 filing just a few years ago to end up being liquidated. In the case of Prima Wawona, the industry’s largest producer of stone fruit, the company is entering Chapter 11 bankruptcy with a clear plan, but recent news shows that plans can go wrong and there are no guarantees once courts are involved.

Stone fruit seller enters Chapter 11

While Prima Wawona may not be a brand name most people know and stone fruit may not be a common term, the market for the company’s products has been growing. It’s also probably easier to think of the impact of this filing when you learn which well-known fruits are actually stone fruits.

“Peaches, cherries, mangoes, plums, and raspberries among others are some of the common types of stone fruits. The stone fruit season is narrow but the different seasons for different stone fruits make it easily available throughout the year,” wrote Knowledge Sourcing Intelligence which forecasts that the stone fruit market will grow by about 4% through 2028., 

Prima Wawona, which describes itself as the industry’s largest producer of stone fruit, will, in theory, benefit from increasing demand. For that to happen, the company has to pull off its Chapter 11 plan which could go in multiple directions.

“In connection with an agreement reached amongst the Company’s Lenders, Prima Wawona is proceeding with a transaction that will involve either the conversion of existing lender debt into equity ownership of the business or allow for a sale transaction to a third-party buyer. The ownership transition is expected to allow for the continued operation and long-term sustainability of the business,” the company shared in a press release.

Bankrupt food seller has lender support

Bankruptcy plans often hinge on the willingness of a bank to fund a company while it finds new owners, In this case, Prima Wawona said that it’s entering the process wih the “backing of its lenders, who entered into a Lender Support Agreement among themselves.”

The bankruptcy court will supervise an auction process that will result in the stone fruit seller being sold to the bidder with the highest and best offer.

“Over the last several years, Prima Wawona has grown tremendously. We recently completed the 2023 harvest season, during which our team grew, packed, and delivered more fruit across more acres than ever before,” CEO John Boken said in a media statement. “At the same time, the business has faced significant headwinds, including increased costs and weather-related impacts, that have combined to make our existing capital structure unsustainable.”

That led to the Chapter 11 filing, during which it intends to continue to operate normally.

“The company has filed a number of customary motions seeking court approval to continue to support its operations during the court-supervised process, including the continued payment of employee wages and benefits without interruption. Prima Wawona intends to pay vendors in full under normal terms for goods and services provided on or after the filing date,” the company shared.