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Oaktree takes control of bankrupt Pierre Foods

The Los Angeles-based private equity firm acquired most of the food product supplier’s debt for less than $200m after it filed bankruptcy earlier this year. Madison Dearborn Capital Partners bought Pierre for $422m in 2004.

A bankruptcy court has approved the reorganisation plan of Pierre Foods, the bankrupt food products distributor once owned by Madison Dearborn Capital Partners, turning over control of the company to Oaktree Capital Management.

The distressed investment firm, which raised the largest distressed fund to date in May on $10.9 billion, is Pierre’s largest creditor.

Pierre will emerge from Chapter 11 protection “within the next few days”, the company said in a statement. A bankruptcy judge waived the 10 day statutory stay period for Pierre because all involved parties agreed on the reorganisation plan.

Pierre’s bankruptcy plan calls for a $100 million debt-to-equity swap and conversion of $85 million of debt into a new mezzanine facility. General unsecured creditors will recover about 12 cents for every dollar they are owed, according to the plan.

The Los Angeles-based firm bought the majority of Pierre’s debt for less than $200 million, according to a report in The Wall Street Journal. Madison Dearborn bought Pierre in 2004 for about $422 million. Another Madison Dearborn company, Hines Horticulture, filed for bankruptcy in August after failing to obtain an emergency capital infusion. Madison bought Hines in 1995 for $205 million.

Oaktree, led by Howard Marks, managed more than $58 billion in assets as of June. Earlier this month, the firm closed a €1.8 billion European distressed investment fund, surpassing its target by about one-third, and eclipsing its prior European fund, which closed on $550 million.