Tasty Baking says difficulties could force sale, shares plummet

The maker of Tastykakes, Tasty Baking Co., said Wednesday that financial difficulties are forcing it to consider selling the company.

Tasty said it has asked its lead banker to extend its line of credit and allow for more time in making payments. It has also hired an investment banker to explore the option of selling the iconic brand.

Philadelphia-based Tasty said it is “experiencing extremely tight liquidity,” citing a sharp rise in commodity prices, production issues at its new bakery and the bankruptcy reorganization of one if its customers, the Great Atlantic & Pacific Tea Co. Inc. (NYSE:GAP).

The company’s shares were trading 36 percent lower, at $4.11, Wednesday morning.

The new bakery in the Philadelphia Navy Yard was expected to save as much as $13 million a year, but through the fourth quarter, that figure is now expected to be closer to $10 million.

Tasty (NASDAQ:TSTY) said its bank group, led by Citizens Bank, has agreed to defer payments on its principal and credit facility until Jan. 14.

The company also will get until Jan. 31 to make loan payments to the state Department of Community and Economic Development, the Philadelphia Industrial Development Corp. and its landlord.

Tasty Baking has hired Janney Montgomery Scott LLC to evaluate its options, which might include refinancing long-term debt due in September 2012, raising additional capital, a merger or sale of the company.

For now, business will continue as usual.

Tasty Baking, which was founded in 1914 in Philadelphia, sells more than 100 products under the Tastykake name, including snack cakes, pies, cookies and doughnuts. It has manufacturing sites in Philadelphia and Oxford, Pa.

Tasty moved into its new baking facility last year. At the time the project was announced, in 2007, Tasty Baking said the facility would cost $75 million. It was funded through the combination of a multibank loan commitment as well as $32 million in low-interest development loans provided in part by the state and the PIDC. It also was awarded a $600,000 Opportunity Grant by the state.

By: Peter Van Allen (Philadelphia Business Journal)

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