Wednesday, January 28, 2009

Something Stinks at Pilgrim's Pride: Management!

On December 1, 2008, Pilgrim's Pride (PGPDQ-$0.60) voluntarily filed for financial relief under Chapter 11 of the U.S. Bankruptcy Code after losing $820 million in 2008 and failing to renegotiate its debt agreements with lenders. In conjunction with the Chapter 11 filing, the company sought—and received approval—to enter into a $450 million debtor-in-possession financing facility arranged by Bank of Montreal as lead agent (the "DIP Financing").

It is worth noting, too, that the $450 million debtor-in-possession financing facility involves financial performance guarantees. Pilgrim must meet minimum monthly levels of EBITDA. For the three-month period ended April 25, 2009, the company must show EBITDA of $57,200,000, according to the amended 10-K filing. With the same management and board in power at Pilgrim, however, it is difficult to imagine how the poultry producer will emerge from the down cycle….
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Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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