October 31, 2008

Pilgrim's Pride shares clobbered over funding shares

Pilgrim's Pride Corp. shares plunged 21 percent Thursday to close just under a dollar, while shares of rival chicken producers rose, suggesting that investors are growing more nervous about Pilgrim's Pride's shot at avoiding bankruptcy.

Pilgrim's Pride, clubbed this year by surging corn costs and falling chicken prices, is trying to raise cash and restructure its debt through asset sales or a recapitalization.

The global credit crunch isn't making things easier on Pilgrim's Pride, which chose to skip another bond interest payment this week as it seeks fresh financing.

CreditSights, an independent fixed-income researcher, said in a report Wednesday that "a bankruptcy scenario now seems highly probable." Pilgrim's Pride has a month to fix its balance sheet before its grace period ends again on its interest payments.

"There are few parts to break off, and even saleable assets would do little to cure Pilgrim's Pride's liquidity woes," analyst Edward Mui said.

In trading Thursday, shares of Pilgrim's Pride closed at 99 cents, its lowest closing price since 1986. Rivals Tyson Foods Inc. (TSN) rose 5 percent, while Sanderson Farms (SAFM) gained 4 percent.

Pilgrim's Pride has said a bankruptcy isn't in the best interests of stockholders. And some stock research analysts think the company can restructure without going into bankruptcy court.

Lenders are putting more pressure on Pilgrim's Pride, forcing it to hire a restructuring chief. Company insiders are also bracing themselves for the worst. Pilgrim's Pride disclosed this week that the board amended the change in control agreements for four top executives.