Dallas-based Borden, one of America’s largest dairy companies founded in 1857, announced this month that it initiated voluntary reorganization proceedings in the District of Delaware under Chapter 11 of the Bankruptcy Code. Borden is the second major U.S. milk seller to declare bankruptcy in recent months after Dean Foods Company announced bankruptcy in November.
Borden intends to use the court process to pursue a financial restructuring designed to reduce its current debt load, maximize value and position the company for long-term success. Borden plans to continue operating in the ordinary course of business, under the court’s supervision.
“Borden is EBITDA-positive (earning before interest, taxes, depreciation and amortization) and growing, but we must achieve a more viable capital structure,” said Tony Sarsam Borden CEO. “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. 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.”
Last year marked several major milestones for Borden, including the revival of Borden’s beloved spokescow Elsie, the brand’s reintroduction in Ohio, and the launch of several innovative products that earned local and national media acclaim, such as State Fair-inspired milk flavors, Gingerbread Eggnog and Kid Builder. The company’s growth last year outpaced the industry as it increased year-over-year sales.
“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. “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.”
A boom in dairy alternatives and rising prices for raw milk have increased financial stress for Borden. Stressing “business as usual” at Borden, Sarsam noted that the company had proactively filed expected motions as part of the court-supervised process, which allow it to pursue day-to-day operations. The company will be seeking court approval for these requests during the coming days and intends to work closely with creditors, customers and employees to identify value-maximizing restructuring plans that will benefit all stakeholders.
“Borden Dairy is a heritage American brand that has been in business since 1857,” Sarsam said. “We have a very tenured workforce of 3,300 people who live and breathe our values of teamwork and creative problem solving, and I am extremely confident and optimistic about our continued success in the future.”
Borden reported a net loss of $42.4 million for 2019 through Dec. 7, growing significantly from 2018 losses of $14.6 million on net sales of $1.18 billion.
For additional information about the reorganization, visit www.bordenfinancialreorg.com.