Bankruptcy filing can’t rescue popular retail food brand

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According to The Street, Over the past two years, retail food brands have struggled with various economic headwinds, including rising operational costs driven by inflation, increased interest rates, and other industry-related challenges.

Leroux Creek Food Files for Chapter 11

Leroux Creek Food, an organic canned fruit and vegetable company, filed for Chapter 11 bankruptcy protection in August 2023 to reorganize its debts as it faced significant financial difficulties. The move highlights the broader challenges facing the food industry as companies adapt to shifting market conditions.

Poultry Industry Faces Financial Distress

The poultry sector has encountered unique economic challenges, particularly due to declining prices rather than inflation. In October 2022, poultry prices dropped sharply, leading to financial distress for several producers and prompting bankruptcy filings, with some companies ultimately shutting down.

Cooks Ventures Shuts Down Operations

Cooks Ventures, a chicken producer based in Decatur, Arkansas, ceased operations in late 2023 and filed for Chapter 7 bankruptcy liquidation in the District of Delaware in April 2024. Despite securing approximately $62 million in financing over the years to expand its operations, the company could not sustain its business in the face of plummeting poultry prices.

Pure Prairie Poultry Lays Off Employees and Ceases Operations

Another casualty in the poultry industry is Pure Prairie Poultry, which unexpectedly laid off all its employees and shut down its operations on October 2, 2023. The company’s Chapter 11 bankruptcy case was dismissed by a judge on September 27, following its request to dismiss the case after failing to secure essential financing.

George Piechel, an owner of the chicken processing plant, stated, “While we continue to explore options, including possible buyers for our operations, our efforts to restart the plant on a limited basis have proven unsuccessful. Without a viable operating plan, we are discontinuing operations at our Charles City production plant effective immediately.”

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Bankruptcy Dismissal and Future Plans

Pure Prairie Poultry had filed a motion on September 25 in the U.S. Bankruptcy Court for the District of Minnesota to dismiss its Chapter 11 case after its secured creditor, Community Bank and Trust, objected to a proposed $15 million debtor-in-possession financing plan from Standton Capital Solutions. Without the bank’s consent to support the financing, the poultry company lacked the liquidity to operate while seeking a restructuring under Chapter 11.

On September 27, Judge Katherine A. Constantine signed the order dismissing the bankruptcy case. The company expressed plans to seek either a sale of its assets or an out-of-court restructuring following the dismissal.

Background on Pure Prairie Poultry

Originally seeking to restructure and continue operations, Pure Prairie Poultry filed for Chapter 11 bankruptcy on September 20, listing assets between $50 million and $100 million and debts ranging from $100 million to $500 million. The company aimed to obtain up to $15 million in debtor-in-possession financing to fund operations during its bankruptcy proceedings.

Having purchased its Charles City poultry plant in December 2021, Pure Prairie Poultry spent nearly a year refurbishing the facility before launching whole chicken production in November 2022. The company’s goal was to serve the branded and private label premium and organic chicken markets across six Midwestern states, including Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. Before ceasing operations, its chicken products were sold at 213 grocery stores in the Midwest.

Financial Struggles and Delayed Funding

The company had previously qualified for a $39 million loan under the Federal Food Supply Chain Guaranteed Loan Program in April 2022 to help cover plant upgrade costs. Initially optimistic about its future as poultry prices peaked in July 2022, Pure Prairie Poultry soon faced adversity when poultry prices fell significantly in October 2022, remaining depressed for nearly a year.

Despite receiving approximately $7 million in federal grant funds on October 20, 2022, as gap funding while awaiting loan proceeds, the federal loan did not finalize until April 2023. The delay in funding compounded financial difficulties, with the plant refurbishment ultimately not completed until November 2023, more than a year and a half after the company qualified for the loan.

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