Pink Slime Bankruptcy: Ground Beef Processor Files For Chapter 11 After Heated Backlash

Pink slime is certainly not the way to America's heart or stomach; and one ground beef processor found that out the hard way.

AFA Foods filed for Chapter 11 bankruptcy on Monday, saying the backlash over the meat filler dubbed pink slime hurt its business.

An orderly sale through Chapter 11 will unlock value and provide a smooth transition for employees, customers and other business partners, Ronald Allen, interim chief executive of AFA Foods, said in a statement, according to Reuters.

The Prussia, Pennsylvania, company is one of the largest ground beef processors in the U.S., processing more than 500 million pounds of ground beef products each year, it said in documents filed in U.S. Bankruptcy Court in Wilmington, Delaware, according to Reuters. In court documents, the company said, recent changes in the market have forced it to sale some or all of its assets; these changes were related to the public backlash against pink slime.

AFA said it has $219 million in assets and $197 million in liabilities. AFA also said it has secured a commitment for $56 million in debtor-in-possession financing from its lenders GE Capital and Bank of America. AFA, which is owned by Ron Burkle's investment firm, Yucaipa Cos., employs about 850 full-time employees and had revenue of $958 million, according to Bloomberg.

Pink slime is a mix of meat trimmings washed in ammonium hydroxide and used in fast food burger patties. It's called finely textured beef by meat processors; however, when the public got wind of what they were consuming at fast food chains like McDonald's, Burger King and Taco Bell in January, much harsher terms were used to describe the gooey, bubble gum-colored substance.

The term pink slime was first used by former USDA microbiologist, Gerajd Zirnstein, who included the phrase in a 2002 email to coworkers after taking a tour of a Beef Products Inc. plant. Celebrity chef Jamie Oliver made the pink slime term popular after using it during his show, Food Revolution, last year. He decried the fatty, rejected meat and said that it's abhorrent for humans to eat this way.

Basically, we're taking a product that would be sold at the cheapest form for dogs and after this process we can give it to human, Oliver said on his show.

Why would any sensible human being want to put ammonia-filled meat into their children's mouths? The great American public needs to urgently understand what their food industry is doing, said Oliver.

Pink slime isn't only common in meat sold at fast food chains. Oliver said that it makes up 70 percent of the hamburger beef in America.

The backlash over pink slime impelled companies like BPI to half production at some of its plants in the U.S. and has led U.S. supermarket operations to say they'll stop buying the pink slime products. McDonald's, Burger King and Taco Bell also distanced themselves from the PR nightmare, stating that they would no longer accept the meat filler for their products.

At the beginning of 2011, we made a decision to discontinue the use of ammonia-treated beef in our hamburgers, Todd Bacon, senior director of quality systems for McDonald's, said in a statement. This product has been out of our supply chain since August of last year. This decision was a result of our efforts to align our global standards for how we source beef around the world.

AFA's bankruptcy filing is one more example of how far-reaching the pink slime controversy is, said Gary Acuff, director of the Center for Food Safety at Texas A&M University in College Station.

The public view of this product is pretty damaged at this point, Acuff told Reuters. I'm not sure they'll recover from something like this.

Jeremy Russell, of the National Meat Association, told Reuters, This is certainly going to have an economic impact on the industry, affecting thousands of jobs, from cattle ranchers to meat processors.