UPDATE 2-Pilgrim's gets temporary waiver on convenant

(Adds share moves, analyst, Smithfield data, byline; changes dateline to CHICAGO)

By Bob Burgdorfer

CHICAGO, Sept 29 (Reuters) - U.S. chicken producer Pilgrim's Pride Corp (PPC.N) said on Monday it received a temporary waiver on a credit covenant and retained advisers to review its operations and refinancing strategy, but investors remained uneasy and sent its shares down 13 percent.

Pilgrim's Pride shares lost nearly 72 percent of their value last week on concerns a growing U.S. financial crisis would limit its access to credit. The company said on Thursday it expected a significant quarterly loss that would lead it to be out of compliance with its credit covenant.

Meanwhile, shares of pork producer Smithfield Foods Inc (SFD.N) fell 13 percent on Monday despite reassurance from the company on Friday that it was in compliance with its debt covenants and had adequate liquidity.

Pilgrim's Pride, like other livestock and meat producers, has struggled this year with high prices for feed and fuel and low prices for chicken, particularly chicken breasts.

In addition, Pilgrim's is saddled with significant debt, largely the result of buying smaller rival Gold Kist Inc in early 2007.

"A combination of protein oversupply, high feed costs, weak domestic demand, and poor risk management has created 'The Great Chicken Crisis of 2008,'" said BMO Capital Markets equity analyst Kenneth Zaslow in a note on Monday about Pilgrim's Pride.

Pilgrim's said on Monday that its lenders agreed to waive a fixed-charge coverage ratio covenant under its credit facilities through Oct. 28, and would provide liquidity in that period.

The company said it hired Bain Corporate Renewal Group to help management review a range of strategic issues and ways to improve its operations. The company also hired Lazard as its investment baker for advice on refinancing and recapitalization opportunities.

Rating agencies Standard and Poor's and Moody's last week downgraded Pilgrim's Pride debt deeper into junk territory in response to the company's announcement on its credit covenant.

On Friday, Smithfield shares dropped as much as 21 percent amid worries that it was being hurt by the same liquidity issues affecting Pilgrim's Pride.

The shares recovered most of that loss later on Friday after the hog and pork company said it "is on very sound financial footing" and was in compliance with its debt covenants.

At the New York Stock Exchange, shares of Pilgrim's Pride were down 47 cents at $3.08 while Smithfield's shares were down $2.24 to $14.87 after falling as low as $14.39. (Additional reporting by Michele Gershberg in New York; Editing by Brian Moss)