Lenders want to see higher sales, earnings at Tasty Baking
The Tastykake maker needs to hit minimum levels of sales and operating earnings to avoid defaulting on amended credit lines while it searches for a possible buyer.
Lenders want to see higher sales, earnings at Tasty Baking
Mike Armstrong, Inquirer Columnist
To keep its lenders at bay, Tasty Baking Co. must show improving sales and earnings over the next six months, according to details of the amended credit lines reached last week and disclosed in a regulatory filing Tuesday.
The Philadelphia baker of Tastykakes, which has struggled to gain promised cost savings from its new bakery in South Philadelphia, announced Jan. 5 that it was in a financial squeeze, largely from the enormous debt it had taken on.
Last week, Tasty Baking gained some breathing room from its lenders, led by Citizens Bank of Pennsylvania, under which it will not have to pay any principal or interest on its $100 million credit lines until the end of June.
The City of Philadelphia, the Commonwealth of Pennsylvania and private investors supplied $6.5 million in new debt financing as well.
However, that only buys Tasty Baking time, because the lenders are requiring the company to pursue a possible sale.
A Securities and Exchange Commission document filed by Tasty Baking shows that about $83.7 million was outstanding under its $100 million in credit lines as of Jan. 13.
The amended agreement requires Tasty Baking to maintain certain levels of financial performance, including earnings before interest, taxes, depreciation and amortization.
For the three months ending March 26, the minimum amount of EBITDA required by lenders is $3.2 million. For the the six months ending June 25, Tasty Baking must have EBITDA of at least $9.3 million.
Tasty Baking must also maintain a minimum level of cumulative gross sales as of certain dates. The schedule filed shows those sales, measured over 13-week periods, must be growing. For the 13 weeks ending March 26, gross sales must be at least $72.3 million.
Do it, Bimbo.— UncleEddie- If you are not worried about our national debit remember this: the chairman of the Federal Reserve Bank of Philadelphia is Charles P. Pizzi, who is the president and CEO of Tasty Baking Company. If he can't run a bakery how is he running a bank responsible for 1/12th of the federal reserve system?— Dwayne516
What a cluster eff. The decision to build that new bakery is staggering in its stupidity. If I owned even a single share of that stock I'd be starting an investors' class action against them. Maybe I'll go buy some now just so I can.- Please don't take your eye off the ball here. The whole idea is for Tastykake to eventually be acquired. The move from Nicetown to the Navy Yard was solely to attract buyers. Come June, Tastykake will be acquired for pennies on the dollar, and Pizzi & Co. will parachute out with seven-figure payouts. Happens every day, folks.— tomfox
- Doesn't take a genius to know that sales will go down if the product becomes smaller, poorer quality and with a higher price. Tasykake buyers were loyal, but we're not stupid.— JoeC.
- Let me see if I understand this situation.
Due to poor sales and low profits this firm is going to receive an injection of new, borrowed capital that lenders think will allow it to magically increase sales and earnings in just two quarters.
This belief is, of couse, reality based since the firm, until now, has never tried to increase sales or earnings.
Perhaps the firm will expanded it's product line to include low cost plastic items from China. Chewy, filling, and calorie free.
I sure hope these lenders are prepared to run a bakery. They arn't showing much promise as capitalists.
Where are these "lenders" when legitimate small businesses are crushed by capital scarcity?
— rtdrewsr - Let's not look past the additional $6.5 M in PA State Funding being provided. That means that WE, the taxpayers of PA are sinking more funding into this debacle. That clown Pizzi needs to go and find another institution to ruin, or better yet run for public office.— samhawk2009
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980.
Reach Mike at marmstrong@phillynews.com.
