Pilgrim's Pride Files for Bankruptcy

MILWAUKEE -- Pilgrim's Pride (PPC), the nation's largest chicken producer, filed for Chapter 11 bankruptcy protection on Monday, a move some analysts had predicted given the company's sagging debt load and volatile feed prices.

The Pittsburg, Texas-based company sought the bankruptcy protection in a filing with the U.S. Bankruptcy Court for the Northern District of Texas on Monday, saying that as of Sept. 27 it had $3.75 billion in assets and $2.72 billion in debts.

Company spokesman Ray Atkinson said Pilgrim's Pride was reorganizing and not liquidating its assets, and the company will keep operating throughout the reorganization process.

Pilgrim's Pride has been saddled by debt due to the acquisition of rival Gold Kist in 2007. That $1.3 billion acquisition is now the primary cause of its large debt load, analysts say.

The company's financial problems have been known for months, and it has had to extend its temporary credit line three times since September -- most recently as last week. Its third extension was set to expire Monday afternoon.

After the market closed Friday, the poultry producer said in a filing with the Securities and Exchange Commission that it would delay filing its 2008 annual financial report. It expects to post a loss of $802 million, or $10.83 per share, for the quarter ended Sept. 27. Those results include a non-cash charge of $501.4 million, or $6.77 a share due to the impairment of goodwill related to its acquisition of Gold King.

The nation's meat makers, especially Pilgrim's Pride, are hurting as their profits shrink in the wake of high commodity prices for key inputs like corn and oil. Those prices are now moderating after reaching record highs this summer, but they are still high for producers. Further hurting the industry is weak pricing due to a drop in demand in foodservice and an oversupply of meat on the market.

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.

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