REFILE-WRAPUP 2-Smithfield, Sanderson shares up on credit view

* Smithfield says does not expect covenant issues in FY '09

* Smithfield Q2 operating loss 21 cents/share, misses view

* Sanderson Q4 loss $1.06/share ex-items, misses view

* Smithfield shares up 20 pct, Sanderson up 10 pct (Refiles to add dropped attribution in paragraph 16; adds comments from conference call, analyst)

By Bob Burgdorfer

CHICAGO, Dec 4 (Reuters) - U.S. pork producer Smithfield Foods Inc (SFD.N) assured Wall Street it should meet credit covenants through fiscal 2009, sending up the shares of meat companies that have been battered by a bankruptcy filing from Pilgrim's Pride Corp (PGPDQ.PK).

Smithfield and chicken producer Sanderson Farms Inc (SAFM.O) both reported larger-than-expected quarterly operating losses on Thursday due to much higher feed costs. [ID:nN04371422] [ID:nN04359450]

But their shares turned higher after Smithfield Foods said it had enough cash to fund operations and was on track to meet credit obligations for the remaining six months of fiscal 2009, and should get waivers, if needed, in fiscal 2010.

"Our projections indicate that we are very comfortable with maintaining compliance in the second half of fiscal 2010," Chief Financial Officer Robert Manly told analysts on a conference call.

However, should there be unexpected costs or changes in demand, the company is now working with bankers to ensure they are granted a waiver.

"We believe an extension, if needed, can be obtained," he said.

During the conference call, analysts applauded Smithfield for its clarity on the covenants and debt issues.

"I think that is what the market was really happy to hear," said Ann Gilpin, analyst at Morningtar.

Losses in the meat business have raised worries among analysts that some companies may be unable to meet debt obligations. Pilgrim's Pride, the largest U.S. chicken producer, filed for bankruptcy protection on Monday after receiving three waivers on its credit covenants.

Livestock and meat producers have struggled this year with more expensive feed and the inability to raise meat prices fast enough to offset those costs. More recently, slowing economies worldwide have hurt meat sales.

While feed prices have declined, they remain historically high and both Smithfield and Sanderson said that may pressure future results.