TORONTO (CP) - Connors Bros. Income Fund units (TSX:CBF.UN) slumped more than 18 per cent to a new low Tuesday after the trust suspended its distributions while estimating it faces US$35 million in costs over a U.S. subsidiary's botulism-scare recall.
Regular distributions could resume in six months, the Toronto-based trust said.
Its units were down $1.81 to $7.85 in early trading on the Toronto Stock Exchange.
The recall of canned chili sauce and other products made by Castleberry's Food Co. was announced July 19 after two incidents of botulism poisoning involving four people. The individuals are expected to recover but the Castleberry's factory in Augusta, Ga., remains closed.
Castleberry's is working with the U.S. Food and Drug Administration, the Department of Agriculture and the Centers for Disease Control and Prevention as the recall continues.
Connors estimates the cost of the recall at US$40 million, or $35 million after insurance recoveries. A charge for this amount will be recognized in the quarter ended June 30.
"While the products involved in the recall represent just four per cent of our annual revenue, the cost to successfully recall these products is significant," stated CEO Chris Lischewski.
"We believe the $35-million estimate is comprehensive in covering the known cost elements at this time, including product recall, destruction, effectiveness checks, quality inspections, consumer reimbursement, professional services, factory shutdown and startup costs," Lischewski added.
"If the cost estimate we have developed for the recall is accurate, we anticipate resuming monthly distributions in six months."
The trust is in discussions with senior debtholders, seeking a waiver that would allow Connors Bros. to maintain compliance with financial covenants while making its previously announced July distribution of 11.25 cents per unit on Aug. 31.
Connors Bros., whose other brands include Clover Leaf Seafoods, Brunswick and Bumble Bee Foods, stated that "while this is a significant financial event for the company and our investors, our underlying business is solid and is performing well with our core seafood business delivering year-on-year increases in both shipments and margins."
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