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Pilgrim's Pride Surges as Concerns on Debt Covenants Subside

By Choy Leng Yeong

Oct. 1 (Bloomberg) -- Pilgrim's Pride Corp., the largest U.S. chicken producer, surged the most in 20 years in New York trading on speculation its lenders may extend leniency on its debt covenant waiver.

Pilgrim's Pride jumped 94 cents, or 38 percent, to $3.43 at 12:03 p.m. on the New York Stock Exchange, ending an 80 percent slide in the previous seven trading sessions. A close at that price would be the biggest gain since March 14, 1988.

On Sept. 25, the shares plunged 40 percent, the most ever, after the Pittsburg, Texas-based company said it may breach a credit covenant because of a ``significant'' loss in the quarter ended Sept. 27. Pilgrim's Pride said on Sept. 29 that its lenders agreed to a one-month waiver on credit covenants through Oct. 28.

``It is our bias that Pilgrim Pride's lenders may well be inclined to show some leniency beyond the current covenant waiver through Oct. 28,'' Christopher Bledsoe, a Barclays Capital Inc. analyst, said in a note today. He estimates a 75 percent probability that Pilgrim's Pride stays solvent.

The bias is based on an 8 percent year-on-year decline in the number of eggs placed in incubators, an indicator that chicken supply will slow, which may boost prices, Bledsoe said.

The company has ``little'' debt maturing before 2013 and certain tranches of Pilgrim's Pride's debt are well collateralized against production assets and more than $1 billion of inventory, Bledsoe said.

The company's money-losing hedges also will soon expire, Bledsoe said