Saddled with debt from the costly acquisition of a competitor and facing skyrocketing feed prices, Pilgrim’s Pride Corp. had been swimming for months in red ink.
Monday, the nation’s largest poultry company filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the Northern District of Texas.
Pilgrim’s Pride, which operates eight processing plants in Georgia, including one in Gainesville, and a further processing plant in Elberton, has been hit hard by increased feed and fuel prices this year, coupled with a slower demand for chicken.
The company was facing a noon deadline on an agreement with lenders to extend its credit lines.
Pilgrim’s Pride had already extended its temporary credit line twice since September when it first said it wouldn’t meet obligations for current loans and was facing a $25.7 million interest payment.
With its December 2006 acquisition of rival Gold Kist, Pilgrim’s Pride became the largest poultry company, both in the U.S. and in Georgia.
The company employs approximately 50,000 people in the U.S. and Mexico and has major facilities in Texas, Alabama, Arkansas, Florida and Georgia, among other states. While it is not known how much of its work force is in Georgia, the company has nine plants, which typically employ 1,000 to 1,500 workers.
The Gainesville plant reported having 1,500 workers at mid-year. Over the weekend, the company was to have completed laying off 335 workers nationwide in a reduction of salaried managers.
In addition to its employees, independent farmers contract with companies like Pilgrim’s Pride to grow chickens from just after birth for about seven weeks when they are ready for processing.
"Pilgrim’s Pride is an important part of the Georgia poultry industry," said Abit Massey, president of the Gainesville-based Georgia Poultry Federation. "We wish them well in reorganization."
Pilgrim’s Pride entered the Gainesville market in 2003 with its acquisition of the poultry processing operation of ConAgra Foods.
Company President and Chief Executive Officer Clint Rivers was optimistic about the future of Pilgrim’s Pride in a statement from the offices in Pittsburg, Texas.
"We expect to emerge from this restructuring a stronger, more competitive company that is well-positioned for growth and enhanced profitability," Rivers said. "We are proud of the consistently high quality of our products, our valued customer relationships and the high level of service we provide."
The publicly traded company was once a family owned and run operation. Lonnie "Bo" Pilgrim capitalized on the family’s last name and was the TV spokesman for the company wearing a pilgrim hat.
The company had grown through acquisition of a number of competitors, mostly in the Southwestern U.S.
Pilgrim’s Pride completed the acquisition of Atlanta-based Gold Kist for $1.1 billion in cash and the assumption of approximately $144 million of debt. At the time, Gold Kist had been the third-largest poultry processor in America, processing 14 million birds per week and employing 16,500 people when it was acquired by Pilgrim’s Pride.
In conjunction with the filing, Pilgrim’s Pride is seeking approval to enter into a $450 million debtor-in-possession financing facility arranged by Bank of Montreal as lead agent.
If approved by the court, the financing will provide an immediate source of funds to the company, enabling it to satisfy the customary obligations associated with the daily operation of its business, including the timely payment of employee wages and other obligations.
The company has asked the court for additional authorizations, including permission to continue paying employee wages and salaries, to provide employee benefits without interruption, and to continue with its various customer programs.
Saturday, the poultry producer said it would delay filing its 2008 annual financial report with the Securities and Exchange Commission. The company also said it expects to post a loss of $802 million, or $10.83 per share, for the quarter ended Sept. 27.
Pilgrim’s Pride, like other food producers, has also been struggling with soaring costs for animal feed and an oversupply of chicken that has lowered retail prices, making it nearly impossible to offset the higher feed costs.
In its fourth quarter, Pilgrim’s Pride bet that feed would continue to be expensive in a process called hedging. Hedging allows a company to profit if the price it pays for an ingredient winds up being lower than the price of that ingredient on the spot market. But the price of corn, a key ingredient in animal feed, unexpectedly dropped during the period, handing the company a loss from the bet.
The Associated Press contributed to this report.