Bank of Montreal may soon jump the queue of secured creditors for financially battered U.S. poultry processor Pilgrim’s Pride.
The Texas company, which operates 46 chicken processing and prepared-foods plants, mostly in the southeastern U.S. and Mexico, went voluntarily into Chapter 11 protection Monday in a U.S. Bankruptcy Court in Texas.
At the same time, the company filed for approval of a US$450 million debtor-in-possession financing facility, on which BMO would be the lead agent. The financing would give Pilgrim’s Pride “an immediate source of funds” to meet its day-to-day business obligations, such as paying its workers.
Debtor-in-possession financing differs from other sources of financing in that it grants the debtor priority over other equity, debt or secured interests in the company.
The company, founded by the Pilgrim family in 1946 at Pittsburg, about 200 km east of Dallas, said in a release Monday it expects business to continue as normal throughout the Chapter 11 process “while it develops a reorganization plan to resolve its temporary operational and liquidity issues.”
CEO Clint Rivers said the company has suffered from “high feed-ingredient costs, an oversupply of chicken, weak market pricing and softening demand.”
Rivers has been the company’s CEO since March, replacing O.B. Goolsby who died the previous December.
Pilgrim’s, which became the world’s biggest chicken company after buying Georgia-based ag co-operative Gold Kist in January 2007 for US$1.2 billion, has spent much of 2008 closing or consolidating operations and has also shed its turkey business.
“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 Monday’s release.
The company said it has asked the court for “additional authorizations,” such as permission to continue paying employee wages and salaries, to provide employee benefits without interruption and to continue with its various customer programs.
Its operations in Mexico and “certain operations” in the U.S. were not included in the filing and will operate outside of the Chapter 11 process, the company said.
Pilgrim’s Pride employs about 48,000 people and has capacity to process over nine billion pounds of poultry per year at a rate of over 45 million birds a week. It also produces about 42 million dozen table eggs per year. About 6,400 poultry producers supply the company’s operations.