‘Pink Slime’ processor, AFA Foods, files for bankruptcy

Wilmington, DE- AFA Foods, the beef processor who recently faced scrutiny over the ‘pink slime’ controversy has filed for bankruptcy in a Delaware court.

AFA Foods, located in King of Prussia, Pennsylvania, was criticized by the media and food activists for using what was dubbed as ‘pink slime’ as an additive to ground beef, which was sold to consumers in the grocery store.  The additive was also used in beef sold to school cafeterias and fast food chains.

The company referred to the ‘pink slime’ as ‘lean finely textured beef’ which is processed by taking scraps of beef, cooking it at a low heat, then putting in a centrifuge to separate the fat from the ‘meat’. After the separating process, the by product is then treated with ammonia to remove pathogens. The final product was shipped to meat packing plants where it is added to ground beef.

After the controversy surfaced, the company saw a dramatic decline in demand and was forced to retain a bankruptcy attorney after they faced a liquidity crisis.

In their bankruptcy petition, AFA Foods listed $219.6 million in debt with $197 million in assets. The company was unable to pay vendors last month and sought a bank loan, which was denied. For some businesses, a bankruptcy lawyer is able to negotiate a loan so that the troubled business can continue to operate.

AFA Foods filed for Chapter 11 bankruptcy and will continue to operate its meat processing plants but have stopped manufacturing ‘pink slime.’ Bankruptcy attorneys will recommend a restructuring plan when they think a company has enough assets to continue running their business and eventually returned to profitability.