After talking lenders into a third extension of the company’s credit limits the day before Thanksgiving, Pilgrim’s Pride Corp. filed for bankruptcy protection on Dec. 1.
“First and foremost, this does not mean we are going out of business,” Clint Rivers, pres./CEO, said in a letter to shareholders on the company’s web site. “In fact, I’d like to emphasize that we expect it will be ‘business as usual’ as we work through this restructuring process. We remain steadfast in our commitment to rebuilding our business and maintaining our core values. Our dedication to our customers, employees and business partners will not change. We deeply appreciate your support and cooperation as we move through this process.”
In its filing, the Pittsburg, Texas-based company, which is said to be the world’s largest chicken processor, cited high feed-ingredient costs, an oversupply of chicken, weak market pricing and softening demand. What was not mentioned was the $1.3 billion acquisition of competitor Gold Kist Inc. in 2007. Pilgrim’s Pride listed assets of $3.75 billion and debts of $2.72 billion.
The company hired a chief restructuring officer on Nov. 10. William Snyder, managing partner of Dallas-based CRG Partners Group, is leading Pilgrim’s Pride’s cost-reduction campaign and developing restructuring plans in an effort to improve its long-term liquidity. Snyder reports to the company’s board of directors.
The company said its operations in Mexico and certain operations in the U.S. were not included in the filing and will continue to operate outside of the Chapter 11 process.
“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,” Rivers said in a statement. “We expect to emerge from this restructuring a stronger, more competitive company that is well positioned for growth and enhanced profitability. We are proud of the consistently high quality of our products, our valued customer relationships and the high level of service we provide.”
In conjunction with the filing, the company was seeking approval to enter into a $450 million debtor-in-possession financing facility arranged by Bank of Montreal as lead agent. That would provide immediate funding to satisfy the customary obligations associated with the daily operation of its business, including the timely payment of employee wages and other obligations.
During the Chapter 11 process, suppliers should expect to be paid for post-petition purchases of goods and services in the ordinary course of business.
“On behalf of the entire management team, I would like to thank our customers and suppliers for their continued support during this process. I also want to recognize our dedicated employees, whose continued support and commitment are crucial to the future success of our company. We are all dedicated to making this financial restructuring a success,” the CEO concluded.
The company first warned investors on Sept. 27 that it expected a large loss for its fiscal year ending on that date and warned creditors it would not end the year within established credit limits. The company had been closing facilities and eliminating jobs all summer. Pilgrim’s Pride employs approximately 48,000 people and operates 35 chicken processing plants and 11 prepared-foods facilities.