September 27, 2008
Pilgrim's Pride seen offloading assets
Pilgrim's Pride, scrambling to shore up its troubled balance sheet, may look to sell assets and tap the private-equity market for cash, an industry analyst said Friday.
US' largest chicken processor is facing a possible default with its bank lenders stemming from continued losses and ill-timed bets on the corn and soy markets.
Stephens Inc. poultry analyst Farha Aslam said Pilgrim's Pride may sell its Mexican operations, its egg business and two plants. Combined, such sales could fetch up to US$255 million, she estimates.
"We believe there is a good chance that Pilgrim's can sell assets and avoid bankruptcy," Aslam wrote in a research note.
Pilgrim's Pride, of Pittsburg, Tex., revealed Thursday it will violate one of its loan covenants when its fiscal quarter ends Saturday. It has obtained a month-long waiver from its lenders as it tries to fix its business and negotiate a new agreement with its banks.
It won't be the first time: earlier this year, Pilgrim's Pride bankers agreed to relax certain loan covenants.
Another possibility for Pilgrim's Pride is private-equity lenders, Aslam said. Any money the company borrows will come at a higher cost. Moody's Investors Service late Thursday cut Pilgrim's Pride corporate rating further into junk status to B2 from B1.
Pilgrim's Pride has taken a number of steps this year to counter the sharp run-up in feed-grain prices, weak prices for boneless chicken breast-meat, and industry-wide oversupply.
It has also cut 2,300 jobs, shaved chicken production output by 6.25 percent, closed one processing plant and shuttered seven distribution centers.
But it hasn't been enough to stave off mounting losses. For the nine months ended June 28, the company racked up a loss of US$197 million. In the year-ago period, it earned US$13.8 million.
A possible cash crunch has pummeled Pilgrim's Pride stock. Its shares have plunged 69 percent so far this week. In recent Friday, the stock was up 1 percent at $3.88.
