CreditSights: Pilgrim's bankruptcy "highly probable"

CHICAGO, Oct 29 (Reuters) - There is a high probability that U.S. chicken producer Pilgrim's Pride Corp (PPC.N) will file for bankruptcy protection as interest payments come due in December on bonds, the independent research firm CreditSights said in a note on Wednesday.

On Monday, the chicken processor said it had received a 30-day waiver on credit covenants and that it would exercise a 30-day grace period on a $25.7 million interest payment on senior notes due Nov. 3.

"A bankruptcy scenario now seems highly probable after the 30-day grace period for the Nov. 3 bond interest payment expires," CreditSights said.

Pilgrim's spokesman Ray Atkinson would not comment on CreditSights' bankruptcy prediction, but said the company was working to improve operations.

"We continue to believe that Chapter 11 (bankruptcy) is not in anyone's best interest," said Atkinson. "We continue to work extremely hard on a long-term solution to improve our liquidity."

Pilgrim's Pride and other chicken companies have been hurt this year by high feed costs and low sale prices for meat, particularly breast meat.

In addition, Pilgrim's Pride is saddled with about $1.5 billion in debt, much of which is related to its January 2007 purchase of Gold Kist Inc.

"Pilgrim's Pride's weak margins are reflective of the tough poultry market fundamentals and perhaps a telling sign of why the banks might be looking to reduce exposure to PPC," CreditSights said.

Pilgrim's Pride and other chicken producers have been cutting production to raise meat prices, but analysts predict it will be late this year or early next year before those benefits are realized.

Also, while feed costs have dropped sharply this fall, chicken companies are still using higher-priced feed bought earlier this year, industry analysts have said.

Pilgrim's has hired Lazard for advice on refinancing and recapitalization. It is working with Bain Corporate Renewal Group on making improvements in its operations. (Reporting by Bob Burgdorfer; Editing by Toni Reinhold)