Processing Magazine

Pilgrim''s Pride files for bankruptcy protection

December 1, 2008

The Associated Press reports that Pilgrim''s Pride Corp. has filed for Chapter 11 bankruptcy protection. The company has been hurt like other meat producers by volatile feed prices and slumping demand but also hobbled by an unmanageable debt load. The company sought protection in a filing with the U.S. Bankruptcy Court for the Northern District of Texas, saying that as of Sept. 27 it had $3.75 billion in assets and $2.72 billion in debts. Pilgrim''s Pride, which controls about 23 percent of the U.S. chicken market, will continue operating during the reorganization and will not liquidate its assets, a spokesman for the company said. The chicken producer has been saddled by the debt from its $1.3 billion acquisition of rival Gold Kist Inc. in 2007 -- what analysts cite as the primary cause of its large debt load. Pilgrim''s Pride''s financial problems have been evident for months. It has had to extend its temporary credit line three times since September. In November, in accordance with rules set by its lenders, the company hired a chief restructuring officer, and has maintained since its credit issues surfaced that it wanted to avoid filing for bankruptcy. Many of the nation''s meat producers are seeing their profits shrink in the wake of high commodity prices for items like corn and oil. Further hurting the industry is a drop in demand, since cash-strapped consumers are cutting back on their restaurant spending, and an oversupply of meat on the market. Both those factors keep prices down and make it more difficult for meat companies to recoup their costs. Producers like Pilgrim''s Pride have pledged to trim or have started cutting production, to remove supply and push prices back up. The company said the bankruptcy protection it is seeking does not include operations in Mexico or certain ones in the U.S., though it did not specify which ones. The protection does include six subsidiaries, including PPC Marketing Ltd., PPPC Transportation Co., To-Ricos Distribution Ltd. and PFS Distribution Co. Pilgrim''s Pride also said in a statement that it is seeking approval to enter into a $450 million debtor-in-possession financing agreement arranged by Bank of Montreal. The company said if the financing is approved by the court, the money will help it run its daily operations, including paying wages and other obligations. It said it has also asked the court for additional authorizations so it can continue to pay salaries, provide benefits and work with its customers.