US: Pierre Foods files for Chapter 11 as rising costs take toll
Pierre Foods has filed for Chapter 11 bankruptcy protection, as the pre-packed sandwich company struggles to deal with soaring raw material costs.
In a statement released today, the company said that it intends to work with all of its constituencies to reach mutually acceptable resolutions and to exit bankruptcy as expeditiously as possible.
Pierre's operations are expected to continue as normal throughout the bankruptcy process and while the company executes on its reorganisation plans.
"As a result of rising raw material prices experienced throughout our industry, it is necessary for Pierre Foods to create a capital structure more appropriate for both our operations and the current marketplace," said Norbert Woodhams, chief executive officer of Pierre Foods. "We have taken and will continue to take steps to strengthen and streamline operations and right-size Pierre's cost structure in order to avoid placing the burden of our inflated raw materials costs solely on our customers. After careful consideration of all available alternatives, the company's board of directors determined that filing for Chapter 11 was a necessary and prudent step that allows us to operate our business without interruption while continuing to implement a debt restructuring in a controlled, Court-supervised environment."
In conjunction with the filing, the company said it has received a commitment for up to $35m of debtor-inpossession financing from certain funds managed by Oaktree Capital Management.
Upon Court approval, the financing, combined with cash from operations, will be used to fund the company's ongoing operations including payment of employee wages and benefits and payments to vendors for both goods and services provided during the Chapter 11 case, the statement said.
In addition, the company said it has commenced restructuring discussions with affiliates of Oaktree that may involve the conversion of debt of the company into equity through a plan of reorganisation, which would result in material deleveraging of the company's balance sheet.
Woodhams continued: "Filing for Chapter 11 is never an easy decision, however, we view this process as an important step in our ongoing strategic restructuring. We expect to emerge from bankruptcy as a stronger, more competitive company, well positioned for growth and enhanced profitability. We are proud of the consistent quality of our products, our valued customer relationships and the high level of service we provide. Finally, we are grateful to all of our employees for their hard work, loyalty and dedication to Pierre Foods."
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