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Friday, Mar 29, 2024

San Fernando Bails Out Local Frozen Food Firm

San Fernando Bails Out Local Frozen Food Firm By JACQUELINE FOX Staff Reporter The city of San Fernando has asked the Valley Economic Development Corp. for help saving a frozen food manufacturer that employs 150 and has been in business in the city for a half century. San Fernando’s redevelopment agency is teaming up with the VEDC to take advantage of a county financing program to bail out OH BOY! Corp., which has been hurt by the consolidation of the supermarket industry and soaring energy bills. The agency earlier this month agreed to apply for a $3 million loan through a relatively obscure county program to help OH BOY! pay off its creditors and possibly expand its operations. Because of increased competition in the frozen food industry and a faltering credit rating, OH BOY! wasn’t able to apply for a loan directly. But the county “float-through” loan program allows cities to use their credit ratings to obtain loans and then pass them on to a third carrier, in this case the VEDC, according to San Fernando city administrator Jose Pulido. San Fernando is using the 50,000-square-foot OH BOY! plant as collatoral for the loan, which must still be approved by the Los Angeles County Board of Supervisors. Once approved, the funds will be transferred to VEDC, Pulido said. The VEDC in turn will put together a refinancing program for OH BOY!, whose annual revenues have held at about $16 million for the last two years even as profits have drastically dwindled. The company manufactures and distributes pizza, stuffed potatoes, garlic bread, meatballs and other specialty frozen foods. It also acts as a distributor for other frozen food firms. OH BOY! founder and president Pietro Vitale said escalating energy bills in 2001 came just as he was grappling with a string of lost receivables on accounts that had been swallowed whole in the supermarket consolidations. “There used to be 16 to 20 chains out there we could do business with, now there are about three,” said Vitale. “So, all of a sudden, the OH BOY! brand, which was number one out there, was losing ground.” Vitale said his company receives 40 percent of the gross sales from OH BOY! products. But changes in the marketplace have forced him to focus more heavily on “co-packing” with other companies, for which it only receives 17 percent of gross sales. Even the co-distribution business for OH BOY! has begun to fall off, most notably with the recent loss of its key account: the Wolfgang Puck frozen pizza line. “I scramble now,” said Vitale. Vitale said he began to fall behind on his electricity payments to Southern California Edison Corp. last summer. SCE threatened to turn off his electricity last fall, the kiss of death for a frozen food company. Vitale said he took out a second mortgage on his home in order to cope with his cash flow problems. Then three months ago, SCE asked for an $80,000 deposit, for the first time in the half century he’s been in business. “For 50 years I’ve never had to pay them a deposit,” said Vitale. “They (SCE) took my two highest bills and combined them and asked me to pay that as a deposit, and they did this without any consideration for the fact that they were threatening to put 150 people out on the streets.” But according to Glen Becerra, regional manager for SCE, the utility’s $80,000 deposit, which was paid, represented only a fraction of what OH BOY! owed. In addition, Becerra said SCE set up a payment plan for Vitale to handle the overdue bills and even sent out a team to identify ways in which OH BOY! could reduce its energy costs. “We worked with them on every level,” said Becerra. “We recognize that they are a large employer and an employer that we have a long history with. So we didn’t want to shut them off. We just couldn’t do that. However, the deposit was necessary because, after 50 years, clearly something had changed. So we had to make changes of our own out of fairness to the company and our other customers.” Vitale said he threw his hands in the air and went to Pulido for help. He said, “They put me in touch with the VEDC. Thank God for them.” VEDC President Roberto Barragan said the funding is expected to help OH BOY! not only turn its finances around, but give Vitale the capital to expand. “We will act as the intermediary for them,” said Barragan. “What makes this so significant is their real estate holdings. They have a plant of 50,000 square feet we are using as collatoral, and they have another 2.5 acres they could use for expansion down the line.” San Fernando, with a predominantly low-wage, Latino worker base, has witnessed an exodus of manufacturing firms over the last few years. Pulido said the county program could be tapped to help other businesses in San Fernando stay afloat. “This is not just a Band-Aid,” said Pulido. “This is a comprehensive financial package.”

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