Allen Family Foods Files for Chapter 11 Bankruptcy Protection - WBOC-TV 16, Delmarvas News Leader, FOX 21 -

Allen Family Foods Files for Chapter 11 Bankruptcy Protection

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SEAFORD, Del.- Poultry company Allen Family Foods, Inc. announced Thursday that it has filed for Chapter 11 bankruptcy protection with the intention to sell substantially all of its assets.

According to a statement issued by the company, Allen's has entered into an asset purchase agreement with Seaford Milling Company, an affiliate of Mountaire Farms of Delaware, Inc., and plans to complete the transaction within 45 days.

Allen's, a four generation company that has been in operations for more than 92 years, noted that over the past few years, the poultry industry has been under severe stress for a variety of reasons. Major stress factors, according to Allen's, include high corn and soybean meal prices, as well as sagging chicken prices, caused by an oversupply of broilers.

As a result, Allen's said it has incurred significant operating losses, which have depleted its liquidity and working capital position. Accordingly, in late 2010 the company engaged a financial advisor to explore strategic alternatives and pursue a potential sale of the company.

As a result of the strategic alternatives review, Allen's decided to enter into an asset purchase agreement with Seaford Milling Company. Under the proposed agreement, Mountaire Farms, through its affiliate, Seaford Milling Company, will acquire substantially all of the assets of Allen Family Foods, with the exception of the corporate owned grow-out farms and related farmland, which will continue to be owned by Allen's.

To facilitate the sale, Allen's filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the state of Delaware. The company said the process will enable Allen's to sell its assets free and clear of all liens and encumbrances and in an orderly manner. Proceeds from the sale will be used to pay down secured debt.

Allen's noted that the proposed asset purchase agreement is subject to a court-supervised auction process to ensure that the highest and best possible price is achieved. Higher and better competing bids will be solicited over the next 30 to 45 day marketing period. Bids will be due by a date to be determined by the court, sometime in late July and the company will conduct an auction immediately following that date. A court hearing will be held to approve the result of the auction and the closing will occur shortly thereafter.

In order to ensure the ongoing operations of the company, Allen's said it has secured debtor in possession financing that will provide sufficient capital to continue its operations. The company said that as a result, it will have the ability to pay for all or the good and services including payroll and grower payments provided during the pendency of the Chapter 11 bankruptcy proceeding.

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