Rising feed and fuel prices combined with decreased demand for the 2 million chickens it processes on a weekly basis left Allen unable to keep up with its debts, including $82.3 million in secured loans from MidAtlantic Farm Credit ACA.
In total, Allen listed assets and debts in the $50 million to $100 million range on its petition filed with the U.S. Bankruptcy Court in Wilmington, Del.
The proposed sale, which would be subject to challenge at a court-supervised auction, threatens to end nearly a century of family ownership for the company, now led by Charles C. Allen III.
Started as a single hatchery in 1919, the company grew to employ 2,273 workers in three states. Allen, which sells its products under the Delmarva and Sussex Farms brand names, has the capacity to produce 600 million pounds of poultry on an annual basis.
While the company had sought to diversify its offerings in recent years, including moving into antibiotic-free chicken, it couldn't overcome rising production costs, especially skyrocketing prices for chicken feed, Brian G. Hildreth, the company's vice president of finance, said in court papers.
In the past year alone, the price of a bushel of corn, the key ingredient in feed, increased 82% over its historical average, he said.
'The combination of unsustainable ingredient costs and reduced finished poultry prices has directly led to the company's financial woes,' Hildreth said.
Allen's loans from MidAtlantic came due on the first of this month. While it was able to obtain a forbearance, Allen was not able to chart a path to repay the debt outside of bankruptcy.
The company will now seek to sell itself at an auction where Mountaire's Seaford Milling Co. unit will serve as the lead bidder. To fund Allen's operations until the sale is completed, MidAtlantic has agreed to extend the company a bankruptcy loan of $22 million.
Source: Dow Jones Newswire, Foodmarket.com