October 1, 2009

Pilgrim's Pride Corp. obtained court approval to maintain control of its bankruptcy case as it works to complete a sale of the company to Brazilian beef producer JBS SA.

 

Judge D. Michael Lynn, of the US Bankruptcy Court in Fort Worth, Texas, extended Pilgrim's Pride exclusive right to file a bankruptcy-exit plan until Dec. 31, according to court papers filed Tuesday.

 

The extension prevents creditors or others from offering competing plans for Pilgrim's Pride as the chicken producer seeks to finalize a restructuring plan that would sell 64 percent of the reorganized company's new common stock to JBS for US$800 million.

 

Pilgrim's Pride will seek court permission to send its restructuring plan to creditors for a vote at an Oct. 20 hearing.

 

Proceeds from the stock sale will be sufficient to repay all creditors in full. Under the restructuring deal, current Pilgrim's Pride shareholders will get 36 percent of the reorganized company's new stock.

 

The deal values the Pittsburgh, Texas, company at US$2.8 billion.

 

Pilgrim's Pride intends to fund its bankruptcy exit with a US$1.75 billion loan from CoBank and Rabobank.

 

The company plans to emerge from Chapter 11 protection by the end of the year.

 

The transaction would further expand JBS' presence in the US In 2007, JBS bought Swift & Co. for US$225 million, and it took on the US beef-processing operations of Smithfield Foods Inc. last year.

 

Pilgrim's Pride used bankruptcy to realign its operations by closing some processing plants and selling off others.

 

The company sold its Farmerville, La., plant to Foster Farms for US$80 million in a deal backed by the state of Louisiana. Pilgrim's Pride used proceeds from the sale to operate while under Chapter 11 protection after it paid off a US$450 million bankruptcy loan.

 

Pilgrim's Pride filed for bankruptcy protection in December 2008, caught between contracts that locked it into high rates for feed and other commodities and falling prices for its products.