Citing the rising cost of raw milk and dairy industry challenges, Dallas-based Borden Dairy Company and several of its affiliated businesses filed for Chapter 11 voluntary restructuring Sunday in order to reduce its debt burden.
The 163-year-old dairy producer chose to file for bankruptcy in Delaware instead of its hometown option, the Northern District of Texas.
Borden General Counsel Alex Madrazo, a former litigation associate at Locke Lord in Dallas, hired New York-based Arnold & Porter as the lead debtor’s counsel. He also hired Young Conaway Stargatt & Taylor as its Delaware counsel.
In its filing, Borden lists 5,000 to 10,000 credits and liabilities between $100 million and $500 million.
Before joining Borden in January 2018, Madrazo was general counsel of the commercial and operations divisions at Dallas-based Dean Foods, which filed for bankruptcy in November.
“The company 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 said late Sunday in a written statement. “Borden plans to continue operating in the ordinary course of business, under the court’s supervision, and remains focused on being the most service-oriented dairy company that offers delicious and nutritious products consumers love.”
Borden operates 12 milk processing plants and nearly 100 branches across the U.S. that produce and distribute nearly 500 million gallons of milk annually for customers in the grocery, mass market, club, food service, hospitality, school and convenience store channels. The company employs about 3,300 people. In 2018, the company reported $1.2 billion in revenues.
Elsie has been Borden’s “spokescow” since 1936.
Borden CEO Tony Sarsam, in an exclusive interview with the Dallas Business Journal late Sunday, said that comparisons shouldn’t be drawn between Borden’s decision to file for Chapter 11 and the bankruptcy filing of the country’s largest milk producer Dean Foods, which sought Chapter 11 protection in November.
“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.”
The challenge for Borden’s executives, according to the DBJ, will be continuing to grow in a U.S. market that’s seen the consumption of milk decline for decades. In 1975, the average American drank 28.7 gallons of milk annually. In 2017, that figure slid to 17.1 gallons. The decline has been nearly constant for 40 years and, in bad news for milk producers, it has escalated over the past decade.