The Pride of Texas!

Was pride lost in Texas yesterday? Perhaps not!

Pilgrim’s Pride Corp., the largest poultry company in the US, filed for Chapter 11 bankruptcy protection. They are headquartered in the Lone Star state. They chose bankruptcy, not a request for a bail out.

In the business and finance environment, there was little surprise. The company, unable to meet its credit obligations, had applied for three waivers. The last of which expired yesterday. With a $25 million interest payment due this week, and tight cash flow, they had little alternative.

Laymen are questioning this as a consequence of the credit freeze and economy. It is not. This is the result of questionable business decisions, which leveraged the company to such an extent that the slightest reduction in cash flow would trigger major repercussions.

According to the 2007 10K, the company had revenue of $7.6 billion up from $5.2 billion the previous year. The increase in revenue was directly attributed to the acquisition of Gold Kist, the 3rd largest poultry company in the US,. Pilgrim’s Pride purchased the company in December 2006 for $1,139 billion.

Acquisitions come at a cost. Long term debt increased to $1.5 billion and it appears that the penalty to a this business decision is a Chapter 11 filing. Unusually high corn and oil prices along with well capitalized competition were contributing factors.

The business commenced operations in 1946. One of the original partners, Lonnie Pilgrim, remains as Senior Chairman of the company today.

As of Sept 2007, in the US, they had 35 processing plantsm. 34 are located in the south. The company employed 49,800 employees of which 16,350 were members of a union.

They are presently in the process of negotiating a $450 million DIP facility with the Bank of Montreal.

Why bring up Pilgrim’s filing?

The government appears to be entering into a new venue, that of financing. Its format, bailouts. What is the criteria for a bailout?

Twos weeks ago 3 candidates from the car industry applied.

On the 1st Thursday of every month retailers post their comparative store sales (CSS) for the previous month. There is little question that the news this Thursday will not be good. What happens next?

The retail industry employs millions of taxpayers throughout the country. How does the insolvent retailer restructure? Do they request a bailout or go through Chapter 11? The only retailer, who is considered "too big to fail" will not be asking. Their competiton might..


.