Reddy Ice Ready for Bankruptcy
"Prearranged" filing with restructuring plan has support of creditors
DALLAS -- Packaged-ice maker Reddy Ice Holdings Inc. is in the final stages of preparing to file for Chapter 11 bankruptcy protection with a plan to hand ownership to a hedge fund holding the company's debt, people familiar with the matter told the Wall Street Journal.
Dallas-based Reddy Ice could seek bankruptcy protection this coming week, perhaps within the next two days or so, the people said. The company would file a prearranged bankruptcy with a restructuring plan that has support ahead of time from creditors, including Centerbridge Partners, to limit the company's time in court, the sources said.
Reddy could then at some later point attempt to merge with Arctic Glacier Inc., a troubled rival in Canada that has filed for bankruptcy, one of the people said.
Reddy Ice retained law firm DLA Piper to prepare the bankruptcy filing, and it has been putting the finishing touches on the plan in recent days, the people said.
A Reddy Ice representative did not respond to requests for comment.
Centerbridge, a hedge fund that often purchases discounted debt of distressed companies, would forgive money owed it in exchange for ownership of Reddy Ice, the largest producer of packaged ice products in the United States, said the report. The investment firm would own a majority of Reddy's new equity.
Serving a variety of customer locations in 31 states and the District of Columbia under the Reddy Ice brand name, the Dallas-based company's principal product is ice packaged in seven-to-50-pound bags, with the 10-pound bags being the primary ice product, principally sold to convenience stores and supermarkets.
Additionally, sales are generated from its proprietary equipment, The Ice Factory machines, which are located in high-volume sites that produce, package and store ice through an automated, self-contained process.
Reddy Ice, laboring under roughly $450 million in debt, leads the industry with about $330 million in annual sales, but it has suffered losses amid competition from freezing and packaging machines that allow c-stores and grocers to make their own bags of ice.
The recession, too, has plagued Reddy Ice as home construction declined, leaving fewer coolers for the company to ice on hot work days, the report said.
The company warned earlier that it was in active discussions with stakeholders on a possible restructuring and that a "prepackaged bankruptcy" could be the quickest way for it to fix its finances.