November 27, 2008

Pilgrim's Pride receives third waiver from lenders

Pilgrim's Pride has reached an agreement with its lenders to extend the temporary waiver under its credit facilities to Monday (Dec 1, 2008).

The extension will allow the company to avoid filing for bankruptcy or selling its assets to cover its debts.


Pilgrim's Pride shares rose 70 cents or 129.6 percent to US$1.24 after the news was announced. However, the stock fell back to close at US$1.02.


Pilgrim's Pride was saddled with debts and has extended its temporary credit line since September, with the second waive expiring yesterday.


The company also has a US$25.7 million interest payment due next week.


Barclays Capital analyst Christopher Bledsoe puts the chances of bankruptcy at Pilgrim's Pride at 75 percent.


Analysts said the company's ill-advised acquisition of rival Gold Kist Inc. in early 2007 for US$1.3 billion was the main cause of its large debt.


High feed costs and oversupply of chickens in the market have also cut deep into the company's pockets, leading to losses in consecutive quarters.


Tyson Foods is expected to benefit should Pilgrim's Pride file for bankruptcy. Tyson has also recently announced an increase of chicken volume by 6 percent in the latest quarter, which some analysts say is a move to force the bankruptcy of Pilgrim's Pride by continuing to saturate the market with chicken supplies.

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