In a move to restructure its debt in response to rising raw material prices, Cincinnati-based Pierre Foods Inc. and its subsidiaries have filed voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.
Pierre Foods said it intends to work with all of its constituencies to reach mutually acceptable resolutions and to exit bankruptcy as expeditiously as possible, while its operations are expected to continue as normal throughout the bankruptcy process and reorganization.
"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, CEO 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,” Woodhams said.
In conjunction with the filing, the company has received a commitment for up to $35 million of debtor-in-possession (DIP) financing from certain funds managed by Oaktree Capital Management L.P.
Upon Court approval, the financing, combined with cash from operations, will be used to fund Pierre Foods’ ongoing operations, including payment of employee wages and benefits and payments to vendors for both goods and services provided during the Chapter 11 case.
In addition, the company commenced restructuring discussions with affiliates of Oaktree that may involve the conversion of debt of the company into equity through a plan of reorganization, which would result in material deleveraging of the company’s balance sheet.
Several of the recent actions taken by the company to improve its liquidity, conserve cash, optimize profitability and right-size its cost structure include:
"Filing for Chapter 11 is never an easy decision, however, we view this process as an important step in our ongoing strategic restructuring,” Woodhams said. “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,” Woodhams said.
Pierre has retained Alvarez & Marsal, a restructuring and corporate advisory firm, to assist the company throughout the restructuring process.
Pierre Foods has enjoyed a dynamic history dating back to 1946. The company is a leading manufacturer, marketer and distributor of high-quality, differentiated food solutions, focusing on pre-cooked and ready-to-cook protein products, compartmentalized meals and hand-heldconvenience sandwiches.