Lenders condemn Borden Dairy for 'surprise and value-destructive bankruptcy'
Lenders are condemning Borden Dairy for its unexpected bankruptcy declaration made Monday, according to court papers.
The 163-year-old dairy producer became the second major U.S. dairy to file for bankruptcy in months as consumer demand for non-dairy products increases.
"The bankruptcy filing was both unnecessary and detrimental to the business, its employees and its vendors, among others. All parties had agreed to an out-of-court restructuring that allowed Borden to continue without the disruption of the bankruptcy proceedings. Notwithstanding our disappointment over the filing, we are committed to working with the company and its creditors to ensure that the business continues to operate and that wages will continue to be paid during the pendency of these cases
Investment firm KKR & Co. Inc., which lent $175 million to Borden, called the filing "unnecessary and detrimental" in a statement to FOX Business.
Beef and dairy cows graze on a farm in Thompson, Conn. (AP Photo/Jessica Hill, File)
"The bankruptcy filing was both unnecessary and detrimental to the business, its employees and its vendors, among others. All parties had agreed to an out-of-court restructuring that allowed Borden to continue without the disruption of the bankruptcy proceedings," KKR said.
"Notwithstanding our disappointment over the filing, we are committed to working with the company and its creditors to ensure that the business continues to operate and that wages will continue to be paid during the pendency of these cases," the firm added.
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KKR also said the chapter 11 bankruptcy filing was made in the interest of its private-equity backer, Acon Investments, and accused Borden of having "an almost fully-baked out-of-court restructuring solution" prepared but "recklessly" declared an "economically irrational" bankruptcy, The Wall Street Journal reported Wednesday citing court papers.
Cows being milked in Morrinsville, New Zealand. (iStock)
KKR added it was given no warning about when or why the dairy producer decided to file for bankruptcy, but it "seems to boil down to somehow using the bankruptcy process to negotiate a transaction that will be more advantageous to Acon," the Journal reported.
Borden also owes $94.6 million -- of a total $255.8 million is owes in secured loans -- to PNC Bank NA, which also said in court papers that Borden gave no warning of its filing.
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PNC and KKR declined Borden's request to use its remaining cash to pay off $56 million in claims to vendors, according to the Journal.
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An Acon spokesperson told the Journal it has derived no benefit from the bankruptcy filing and "it is safe to say that KKR’s assertions are at a minimum deeply misinformed."
This article has been updated to include KKR's statement to FOX Business.
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