Borden Dairy Inc., one of the largest milk producers in the United States, announced it would file for Chapter 11 bankruptcy protection, becoming the second major dairy company to do so in the past two months.
Dean Foods, the largest milk producer in America, filed for bankruptcy on Nov. 12.
Borden said in a statement that it filed for bankruptcy because it can’t afford its debt load and pension obligations. The firm currently has about 3,300 employees.
“We must achieve a more viable capital structure,” said Borden CEO Tony Sarsam in a statement. “This reorganization will strengthen our position for future prosperity. Over the past 163 years, we have earned the distinction of being one of the most well-recognized and reputable national brands.”
In the bankruptcy filing, Borden listed estimated debts and liabilities ranging between $100 million and $500 million, according to the Dallas Business Journal. It filed the claim in the U.S. Bankruptcy Court for the District of Delaware.
Sarsam told the Business Journal on Sunday that Borden’s bankruptcy cannot be compared with Dean’s bankruptcy filing.
“Our situation differs in fairly significant ways,” Sarsam said. “All of our businesses are EBIDTA-positive and we’re growing. Dean is shrinking, and they’ve been negative for multiple quarters in a row. Their filing was largely about operational problems they couldn’t solve,” said Sarsam.
Dean Foods, meanwhile, reported losses in seven of the last eight quarters, according to the report.
“Unlike a lot of companies in this situation, we’re still focused on our people,” Sarsam said. “A lot of companies will raise the white flag on employee recognition and pay increases. We’re not going to do any of that. It’s business as usual.”
But Borden’s statement said that its business has been impacted by broader dairy trends.
“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,” Sarsam said in the statement. “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 reorganize through this court-supervised process.”
Over the past four decades or so, American milk consumption has been gradually on the decline. In 1975, the average American drank about 28.7 gallons of milk per year, while by 2017 the average person drank about 17.1 gallons annually, the Business Journal noted.