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TreeSweet Companies Declare Debt of $85 Million

January 26, 1988|MARY ANN GALANTE | Times Staff Writer

The TreeSweet companies, a 50-year-old juice producer, has been caught in a squeeze and filed for bankruptcy with debts of about $85 million.

Los Angeles-based Early Industries is negotiating to buy all the assets of the four TreeSweet companies for $27.7 million, about $20 million of which will be cash, a TreeSweet attorney said Monday.

Early's purchase should mean no further layoffs at TreeSweet's three offices: a Santa Ana processing and packaging plant that employs about 99 people; a smaller plant in Winterhaven, Fla.; and the corporate headquarters in Houston, said Scott MacDonald, TreeSweet's chief financial officer.

"It's anticipated that there will be no layoffs and operations will continue . . . and be even more profitable than they have been in the past," said Marc Beilinson, an attorney with Los Angeles' Buchalter, Nemer, Fields & Younger, which represents TreeSweet in the bankruptcy.

During the first half of 1987, the company trimmed its work force by about 150 down to the current 300--including an undisclosed number in Orange County.

Privately owned TreeSweet produces and packages orange juice, varied citrus drinks, plus the Awake and Orange Plus soft drinks. It has four divisions--TreeSweet Products Co., TreeSweet Corp., TreeSweet Marketing Co., and TreeSweet Specialty Beverage. All filed Jan. 19 for protection from creditors under a Chapter 11 petition in U.S. Bankruptcy Court in Santa Ana.

In 1985, Texas investors Clinton E. Owens and E. Trine Starnes bought the TreeSweet companies in a leveraged buyout from General Foods and San Francisco-based Di Giorgio Corp. Business soon started to sour.

Competition in the frozen concentrate business has become fierce in recent years, MacDonald said Monday. Industry observers also blame a plan to branch out into six low-calorie juice beverages marketed as TreeSweet Lite.

In 1986, sales of TreeSweet's frozen orange juice plunged to about $10 million, from $18 million to $20 million in 1985, MacDonald said.

To reduce operating losses, TreeSweet pared its staff throughout the first half of last year.

TreeSweet finished 1987 with revenues of about $70 million and an undisclosed net loss. But according to MacDonald, operating losses were "relatively insignificant" during the second half of last year.

Bankruptcy papers reveal that TreeSweet has two major secured creditors: Di Giorgio Corp., which is owed about $32 million, and the Bank of American Natural Trust & Savings Assn., which is owed about $27 million.

But under a reorganization that has been negotiated with a group of its creditors for the past 11 months, TreeSweet would pay unsecured creditors about 15 cents on the dollar. Di Giorgio would be paid cash of about $3.9 million, a note of $2.5 million, plus more interest and fees based on pretax profits. Bank of America would receive $6.3 million in cash, a note of $700,000, plus interest based on pretax profits.

Early Industries would buy TreeSweet's assets. Early, which is involved in a number of consumer products, including rice and wine, is just entering the juice business and is acquiring some juice assets from Kraft, MacDonald said.

TreeSweet must now propose a disclosure statement to creditors. At the soonest, Early Industries will buy TreeSweet by late April, Beilinson said.

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