Blames soaring cost of chicken feed. (And, of course, derivatives.)
WSJ: Pilgrim’s Pride Corp. said Monday that it had lined up $450 million in new funding following its Chapter 11 bankruptcy-court protection.
The Texas-based chicken producer, the largest by revenue, had fought to avoid a Chapter 11 filing after taking a hit from weakening consumer demand and poultry prices, which left it unable to pass on soaring feed costs in the first half of the year. Its board opted for a filing at a meeting Sunday.
Despite easing feed costs and company pledges to cut production, analysts remain concerned about capacity discipline in the sector. Shares in rival poultry producers including Tyson Foods Inc., Sanderson Farms Inc. and Smithfield Foods Inc. fell in the wake of the filing, reflecting concern that the domestic market would remain oversupplied.
Pilgrim’s Pride vaulted over Tyson to become the market leader with its $1.1 billion acquisition of rival Gold Kist Inc., only to be squeezed by over-production at home and abroad as well as rising commodity costs.
The company was also left exposed by loss-making corn-futures contracts purchased when feed costs were spiraling.
Bank of Montreal has lined up to provide $450 million in debtor-in-possession funding, subject to approval by the bankruptcy court in the northern district of Texas.