Pilgrim's Pride receives third waiver from lenders

By: AP
By: AP

NEW YORK (AP) -- Troubled chicken processor Pilgrim's Pride Corp. said Wednesday it reached an agreement with its lenders to extend its credit lines until Monday.

The Thanksgiving reprieve allows the company to avoid filing for bankruptcy or selling its assets in order to cover its debts.

Shares surged sharply, rising 70 cents, or 129.6 percent, to $1.24 after the news was announced. The stock came back down somewhat to close up 48 cents at $1.02.

The Pittsburg, Texas-based company has been saddled by debt and has already extended its temporary credit line twice since September when it first said it wouldn't meet debt obligations for current loans.

The second waiver was set to expire Wednesday. The extension gives the company until noon Monday.

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

Barclays Capital analyst Christopher Bledsoe said investors should not read too much into the latest credit line extension, saying it could mean "banks are continuing to work with Pilgrim's to try to find a solution or it could mean the company needs a couple more days to prepare a bankruptcy filing."

Bledsoe puts the chances of a bankruptcy at Pilgrim's Pride at 75 percent.

The company has been attempting to avoid filing for bankruptcy, even as Wall Street analysts increasingly predict that may be the only option. Earlier this month, in accordance with rules set by its lenders, it hired a chief restructuring officer to determine any alternatives.

Pilgrim's Pride has controlled just under a quarter of the market since acquiring rival Gold Kist Inc. in early 2007. That $1.3 billion acquisition is now the primary cause of its large debt, analysts say.

The company has also been a victim of soaring costs for animal feed - made with expensive corn and soybeans - and an oversupply of chicken that has lowered retail prices, making it impossible for producers to offset the higher costs.

Producers, including Pilgrim's Pride, have pledged or started to cut production, to remove supply and push prices back up. But others, like number-two chicken producer Tyson Foods Inc. have not.

Earlier this month, Tyson, which also makes beef and pork, said it increased its chicken volume 6 percent in the latest quarter. Some analysts say that it was trying to make a permanent cut in total industry production - such as by forcing the bankruptcy of Pilgrim's Pride - by holding off on its own production pullbacks.

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AP Business Writer Emily Fredrix in Milwaukee contributed to this report.

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