Hernando Ramírez-Santos November 13, 2019 News
Dean Foods, one of the largest dairy producers in the U.S., filed for Chapter 11 bankruptcy proceedings in the Southern District of Texas, citing the company has been suffering for the continuing decline in milk consumption.
The company intends to use this process to protect and support its ongoing business operations and address debt and unfunded pension obligations while it works toward a sale of the company, according to a press release.
Dean Foods also announced that it is engaged in advanced discussions with Dairy Farmers of America, Inc. (DFA) regarding a potential sale of substantially all assets of the company. If the parties ultimately reach agreement on the terms of a deal, such a transaction would be subject to regulatory approval.
“The actions we are announcing are designed to enable us to continue serving our customers and operating as normal as we work toward the sale of our business,” said Eric Beringause, who recently joined Dean Foods as President and Chief Executive Officer.
“Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption. Importantly, we are continuing to provide customers with an uninterrupted supply of high-quality dairy products, as well as supporting our dairy suppliers and other partners,” said Beringause.
Americans’ per capita consumption of fluid milk has fallen 26% in the last two decades, according to data from the U.S. Department of Agriculture, reported CNBC.
The Dallas-based milk processor is operating in the ordinary course of business. Dean Foods employs 16,000 people and operates 60 processing facilities across the country.
The company has received a commitment of approximately $850 million in debtor-in-possession (DIP) financing from certain of its existing lenders, led by Rabobank. Following court approval, Dean Foods expects to use the DIP financing, together with cash on hand and operating cash flows, to support its continued operation throughout this process, including payment of employee wages and benefits without interruption and payment to suppliers and vendors in full under regular terms for goods and services provided on or after the filing date.
Beringause added, “Since joining the company just over three months ago, I’ve taken a hard look at our challenges, as well as our opportunities, and truly believe we are taking the best path forward. In recent months, we have put in place a new senior management team that not only has considerable experience in the dairy and consumer product industries but also in executing major turnarounds. I am confident we have the right people in place to lead us through this process.”
In conjunction with the court-supervised process, Dean Foods has filed several customary motions seeking court authorization to continue to support its business operations. The company also intends to file bidding procedures with the court to conduct a sale under Section 363 of the U.S. Bankruptcy Code and work with its creditors to explore a potential stand-alone plan of reorganization.