BY Richard Summerfield
One of the largest and oldest dairy companies in the US, Borden Dairy, has filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court for the District of Delaware.
The company, founded in 1856, listed estimated debts and liabilities, both in a range from $100m to $500m. Amid rising milk prices and the increasing popularity of dairy-free equivalents including almond, rice and soy milk, Borden’s debt load became unsustainable. The company was also unable to meet its pension obligations. Borden has around 3300 employees, 22 percent of which are covered by a collective bargaining agreement.
The dairy market has experienced a number of significant challenges of late, with Borden becoming the second largest dairy producer to file for bankruptcy in recent months, after its larger rival, Dean Foods Co, filed in November 2019.
However, while Dean Foods reported a net loss in seven of its last eight quarters, Borden’s growth last year outpaced the wider industry, despite a 6 percent drop in overall US milk consumption since 2015. The company recorded revenue of $1.2bn in 2019. Part of the company’s increased sales result from other products it produces, including sour cream, cottage cheese, teas and orange juice.
“Borden is EBITDA-positive and growing, but we must achieve a more viable capital structure,” said Borden chief executive Tony Sarsam in a statement announcing the filing. “This reorganisation will strengthen our position for future prosperity. Over the past 163 years, we have earned the distinction of being one of the most well-recognised and reputable national brands. We remain committed to ‘The Borden Difference’, which is our promise to be the most service-oriented dairy Company that puts people first. We will continue serving our customers, employees and other stakeholders and operating business as usual throughout this process.
“Despite our numerous achievements during the past 18 months, the Company continues to be impacted by the rising cost of raw milk and market challenges facing the dairy industry,” he continued. “These challenges have contributed to making our current level of debt unsustainable. For the last few months, we have engaged in discussions with our lenders to evaluate a range of potential strategic plans for the Company. Ultimately, we determined that the best way to protect the Company, for the benefit of all stakeholders, is to reorganise through this court-supervised process.”
News: Borden Becomes Second Big U.S. Milk Producer to File for Bankruptcy