Facing a combination of high feed prices, a glut of product on the market and a swelling debt load, one of the nation’s largest poultry producers filed for bankruptcy protection on Monday.
The company, Pilgrim’s Pride, which started as a feedstore partnership in 1946, said that it had sought Chapter 11 protection in the Federal District Court in North Texas as it tries to negotiate with its creditors.
The filing was not unexpected. Pilgrim’s Pride had already sought to extend deadlines from its lenders, including CoBank and the Bank of Montreal.
“After careful consideration of all available alternatives, the company’s board of directors determined that a Chapter 11 filing was a necessary and prudent step and the best way to obtain the financing necessary to maintain regular operations and allow for a successful restructuring,” the chief executive, Clint Rivers, said in a statement.
With the filing, Pilgrim’s Pride joined a growing list of companies that have been buffeted by the storm of economic conditions. The chicken producer said, however, that its setbacks were temporary and that its outlook and that of its industry would improve in 2009.
In a court filing, Pilgrim’s Pride said it had arranged $450 million in debtor-in-possession financing through the Bank of Montreal, which will allow it to continue operating.
Pilgrim’s Pride said revenue in the 12 months that ended Sept. 27 was $8.5 billion, but that much of the money was needed to cover a sharp rise in the cost of feed like corn and soybeans. Pilgrim’s Pride needs more than 285 million pounds of corn and more than 82 million pounds of soybean meal a week to feed its 238 million chickens.
Efforts to hedge feed prices this summer backfired as corn prices began to slide in July.
The company has also been hobbled by $2.72 billion in debt, much of it taken on when the company acquired a rival, Gold Kist, for $1.1 billion in late 2006. Pilgrim’s Pride said it expected to report an $802 million loss for its fourth quarter, largely because of a write-down of Gold Kist.
This year, the company hired Bain & Company and the investment bank Lazard to consider its options, and last month it appointed William Snyder of CRG Partners Group, an advisory firm, to oversee its restructuring.
As of Nov. 25, Pilgrim’s Pride had nearly 48,000 employees in North America, with 37 processing plants in the United States and Mexico.
Click for Full Text!