January 21, 2009

Pilgrim's Pride Corp. one the country's largest poultry producers, wants to sell its stake a grain elevator business to joint venture partner Archer Daniels Midland Co. (ADM).

 

Pilgrim's Pride, which filed for Chapter 11 protection last month, is seeking court approval to sell its interest in the grain elevator business for US$5 million, according to papers filed in US Bankruptcy Court in Fort Worth, Texas.

 

The Texas-based chicken company is seeking to sell its stake to ADM after putting the business up for sale drew a single offer from a grain vendor, according to papers filed Friday. That deal would have netted Pilgrim's Pride less than a sale to ADM, the company said.

 

Pilgrim's Pride, which is seeking to reorganize its business in face of worldwide chicken glut, is asking to sell its interest in the joint venture absent a court-supervised auction.

 

A common feature of Chapter 11 sales, auctions help ensure the bankruptcy estate receives the best price for the assets on the block.

 

But Pilgrim's Pride says ADM, which has a right of refusal to any deal, will prevent a sale of the company's stake in the venture to anyone other than itself.

 

By selling the stake privately, the company will avoid the cost associated with a legal fight with ADM.

 

Bankruptcy Judge D. Michael Lynn will hold a hearing on February 10 on Pilgrim's Pride's bid sell its stake in the company.

 

Pilgrim's Pride, based in Pittsburgh, Texas, filed for bankruptcy late last year, as it struggled to weather a liquidity crunch resulting from soaring prices for corn and soy used in chicken feed during the first half of the year.

 

Feed costs later crashed, but the company said it was locked into over-valued futures contracts.

 

Squeezed by high costs and falling chicken prices as demand slowed, Pilgrim's Pride attempted to work out better terms from lenders, and it pursued additional investors.

 

Those efforts were unsuccessful, however. In early November, Pilgrim's Pride said it would skip a US$25.7 million interest payment.

 

On December 1, 2008, the company filed for Chapter 11, listing US$3.75 billion of assets and US$2.72 billion of liabilities.

 

Last month, Pilgrim's Pride said Chief Executive Clint Rivers had resigned and would be replaced by former Foster Farms executive Don Jackson, who'll lead the company during its reorganization.