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Hobbled by a large debt load and volatile feed prices, Pilgrim's Pride Corp., the nation's largest chicken producer, filed for Chapter 11 bankruptcy protection.
In its filing with the U.S. Bankruptcy Court for the Northern District of Texas, the Pittsburg, Texas-based company and the largest U.S. chicken said as of Sept. 27, it had $3.75 billion in assets and $2.72 billion in debts it. The company has lined up $450 million in new funding as it seeks to reorganize and gain immediate liquidity to accelerate planned improvements and focus on improving the business cost structure.
The chicken producer, which will keep operating throughout the reorganization process, has been saddled by debt from its $1.3 billion acquisition of rival Gold Kist Inc. in 2007, which is what analysts cite as the primary cause of its large debt load. The company has also been hampered by surging feed costs and weak prices for chicken meat and softening demand at a time of oversupply.
A letter to shareholders undersigned by Clint Rivers, president/c.e.o. was posted on the company's Web site on Monday as follows:
"Dear Pilgrim's Pride Stakeholders:
"Today, Pilgrim's Pride Corporation voluntarily filed for relief under Chapter 11 of the U.S. Bankruptcy Code. First and foremost, this does not mean we are going out of business. 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.
"The company's Mexican operation - ranked number two in poultry sales - was not included in the bankruptcy filing and could emerge as a potential target for Tyson or Sanderson Farms, according to press reports, although analysts estimate it would generate net proceeds of just $100 million.
"The bankruptcy filing comes as Pilgrim's Pride had been negotiating further extensions of having debt covenants waived. Speculation had been rampant that the company would seek bankruptcy protection to give it time to get its house in order."