Chiquita used a prearranged Chapter 11 to cut $700M of debt and keep bananas running

Chiquita Brands International, one of the world's best-known banana companies, filed for Chapter 11 on November 28, 2001 under a prearranged plan agreed with bondholder committees earlier that month. The filing covered only the parent holding company, leaving its operating subsidiaries, including the banana business, outside the case and running normally.

The plan's purpose was to give Chiquita a capital structure its operating cash flow could support. It reduced debt and accrued interest by more than $700 million and cut future annual interest expense by about $60 million, solving the mismatch between a commodity-price-driven business and fixed debt payments.

Judge J. Vincent Aug Jr. approved the plan on March 8, 2002, with bondholders owning more than 90 percent of the reorganized company. Chiquita emerged the following week, issued new stock and securities, and installed a new chairman and chief executive, Cyrus Freidheim Jr., to lead the fresh start.

The new shares began trading on the New York Stock Exchange and rose 51 cents to $15.50 on their first day, a signal that investors accepted the reset rather than a liquidation.

Emerged in March 2002 with debt and accrued interest cut by more than $700M and annual interest expense down about $60M, while banana operations never stopped.

Filing only the parent kept banana farms, ships and brand assets out of the case.

Bondholders agreed in advance, so the reorganization was quick and orderly.

Cutting more than $700M of debt matched the capital structure to cash flow.

Lower interest expense of about $60M a year gave the business breathing room.

Filing only the holding company lets a prearranged plan reset the balance sheet without disrupting operations; when cash flow is the constraint, cut the interest bill, not the business.

Chiquita emerged in March 2002 as a public company with bondholders in control and a new CEO. The banana operations had continued without interruption through the case, and the lighter balance sheet let the company return to normal trade financing. The case became a standard example of a prearranged, holding-company-only Chapter 11 used to reset a commodity business's capital structure.