By:  LINDSEY O’NEILL, ESQ.

Pilgrims Pride Corp., the nation’s largest chicken producer, has filed for bankruptcy protection.  While the company will reorganize, it does not intend to go out of business. 

How does a company which controls nearly a quarter of the market fall into bankruptcy?  The company’s problems apparently stem from rising feed costs and increased debt.  The company recently acquired a competitor, Gold Kist, at the same time feed and fuel prices went up.  Also, consumers are spending less – not only are they eating out less frequently, but their pinching their grocery budgets as well.  Like many companies these days, those in the poultry business have been unable to raise chicken prices enough to offset those increased costs.  Tough economic times aren’t exactly the best time to hike up prices.  A case of bad timing perhaps, but unfortunately the economic conditions have forced many businesses to reassess themselves as a going concern. 

There is good news about Chapter 11 bankruptcy, however.   Businesses that voluntary file for Chapter 11 protection are seeking to reorganize their debts so that the company can remain in business. All is, therefore, not lost!  Pursuant to Chapter 11, the court has the authority to give companies a fresh start by granting them complete or partial relief from their existing debts.  Chapter 11 exists because there are times when it makes more sense for both a company and its debtors to see the business succeed.  A plan is developed that is approved by creditors and the court that allows the business to continue operating and to pay its debts over time.

Business owners are not eager to give up control of their company when filing for Chapter 11.  However, Chapter 11 is designed to protect the greater good.  It protects the jobs of the existing employees and it keeps the business going so that it can make the money necessary to pay off its existing creditors. 

In this case, it will be interesting to see what happens to chicken prices.