Wednesday, July 14, 2004

Palama Meat Co.,
H&W sold

A California investment firm is
buying the largest meat processor
in the state out of bankruptcy

One of Hawaii's oldest meat slaughtering, cutting and wholesale businesses, Palama Meat Co., has been purchased out of bankruptcy along with H&W Foods, an affiliated food-service distributor, by a former Hawaii resident for an undisclosed amount.

The companies were bought May 24 by California-based 180 Capital Fund I LP, a turnaround investment company that provides financial restructuring and operational expertise to distressed companies. With the new ownership, under the name of Palama Holdings LLC, current employees will continue to be a part of the operation and more staff will be needed, said Chief Executive William Loose.

"We are proud to be a part of the new era of Palama Meat Co. and H&W Foods, which have both enjoyed a long and proud history in Hawaii," Loose said. "We view this buyout as a rebirth that will only strengthen this already viable company."

Company representatives could not be reached for further comment.

The purchase will save Palama Meat -- established in 1952 -- and H&W Foods -- established in 1962 -- from closing. The two merged in 1998 and a couple of years later were integrated in a single processing and warehouse facility in Kapolei, where about 90 percent of all the ground beef consumed in Hawaii was processed.

Palama Meat, the largest meat processor in the state, quit buying meat and accrued debts with several local ranchers after filing for bankruptcy last year, said Calvin Lum, owner of the North Shore Cattle Co.

The company, along with H&W Foods Acquisition Corp. and H&W Distributors Inc., filed for Chapter 11 bankruptcy protection when business dropped off following the 9/11 attacks. The companies' financial problems were exacerbated by war with Iraq, with combined debts reportedly totaling somewhere between $15 million and $25 million.

The purchase of the company is expected to help support local ranchers and create more business opportunities, Lum said.

"Palama Meat is a vital player in the beef cattle industry as far as those of us ranching are concerned," Lum said. "When they went under, it left a big gap in our business."

Members of Hawaii's ranching community are optimistic that new ownership will help revitalize Palama Meat, which produces local brands such as May's line of teriyaki flavored hamburgers, chicken and short ribs and Hawaiian Warrior jerky products, Lum said. Ranchers also hope the new company will help them yield higher profits.

"We've all been using smaller processors, but using a larger processor like Palama can reduce costs because the economies of scale are larger," Lum said.

The revitalization of Palama Meat could also attract companies that want to bring production back to Hawaii, Loose said.

Palama Meat has brokered a deal with Rego's Purity Foods, a local company that moved production to the mainland nearly a decade ago for economic reasons, to process sausages in Palama's Kapolei facility.

"We could not pass up the opportunity to have our sausages made in Hawaii, as it was originally intended," said Scott Stevenson, Rego's president.


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