Pilgrim's Pride at end of temporary credit line

The sky could be falling on Pilgrim's Pride Corp., the chicken industry's biggest producer.

With its temporary financing ending Tuesday and credit markets tight, the company faces an uncertain future. Some analysts say it could file for bankruptcy, though Pilgrim's Pride has said that option is unlikely. Others say the company is ripe for a buyout by competitors.

“We find it unlikely that the company, under pressure from its bankers and advice from its consultant, will continue in its current form,” Deutsche Bank North America analyst Christina McGlone wrote last week. “Essentially, Pilgrim's Pride as we know it today will cease to exist.”

Company spokesman Gary Rhodes said Pilgrim's Pride won't comment. Earlier this month, he was widely quoted as saying that filing for bankruptcy wouldn't be in “anyone's best interest.”

He told The Associated Press this month that the company was working on a plan to help it address industry woes, such as weak demand and pricing and an oversupply of chicken. He also said it was looking at opportunities to refinance and find more ways to operate more efficiently.

“We recognize that, given the recent uncertainty in the stock market and the credit markets, there will be speculation and rumors about Pilgrim's Pride,” he wrote in an e-mail.

The company's stock tumbled sharply in late September on worries about its credit and future. It closed Friday at $2.17, down 12.5 percent or 31 cents. It's down nearly 93 percent from its 52-week high of $30.15.

The entire meat industry is hurting, but Pilgrim's – which has just under a quarter of the chicken market – is perhaps more so because of its high debt rate and bad bets on hedging, analysts say.

It's unclear what the future holds for Pilgrim's Pride workers in the Carolinas. Rhodes and another spokesman did not return phone calls Sunday.

The company's facilities include several in the Charlotte region: a chicken-processing plant in Marshville, feed mills in Stanley and Wingate and hatcheries in Stanley and Concord, according to a 2007 annual report. It is one of Union County's top employers.

Some N.C. employees have already been affected by the industry's woes. In March, Pilgrim's Pride announced it would close a chicken-processing plant in Siler City, blaming U.S. ethanol policies for pushing the industry into crisis. That plant, about 100 miles northeast of Charlotte, employed 830 people.

Mike Cockrell, chief financial officer for Sanderson Farms Inc., said business is tough. It's prime wing-eating season, he points out – with fans watching football and the World Series – but the down economy is keeping people from going out. Normally the company can't keep up with demand. Now they have truckloads of extras.

“Our whole industry is challenged right now,” he said. “We got high corn and soybean meal prices and very, very weak domestic demand for chicken, particularly from the consumer who eats away from home.”

Since much of the industry is hurting, it's not likely that Pilgrim's Pride's lenders would encourage it to file for Chapter 11 bankruptcy protection, said Barclays Capital analyst Christopher Bledsoe.

He said if that happened, the Pittsburg, Texas-based company would have to sell its assets, including chicken products, which would flood the market and push prices downward.

Tightening credit markets are making it more difficult for many companies to get financing, particularly one like Pilgrim's Pride, Bledsoe said. The company carries a large debt load primarily from its $1.3 billion acquisition of rival Gold Kist Inc. in early 2007, which made it the nation's biggest chicken producer.

Instead, he said, the banks may prefer Pilgrim's Pride to be sold either outright or in part, preferably to someone with a stronger balance sheet.

Tyson Foods Inc., the second biggest chicken producer, has about $1.5 billion in liquidity, Bledsoe said, so it could afford to buy a portion of Pilgrim's Pride. A total buyout, which would put about 45 percent of the market into one company, wasn't likely to pass anti-trust clearance, he said.

Staff writer Kirsten Valle contributed