Sept. 25 (Bloomberg) -- Pilgrim's Pride Corp., the biggest U.S. chicken producer, expects to breach one of its credit covenants because it will post a ``significant'' fourth-quarter loss.

Pilgrim's Pride will report a loss in the three months ending Sept. 27 due to higher feed costs, lower meat prices and the impact of grain hedges, the Pittsburg, Texas-based company said in a PR Newswire statement today. The company doesn't expect to comply with its ``fixed-charge ratio coverage covenant.'' Pilgrim's Pride will be in compliance with all other covenants as of the end of its fiscal year this month, it said.

The company took on debt and surpassed Tyson Foods Inc. in terms of production when it bought Atlanta-based Gold Kist Inc. for $1.1 billion in January 2007. Pilgrim's Pride, formed in 1946 when Aubrey Pilgrim and his partner Pat Johns bought a feed store for $3,500, grew to have net sales of $7.6 billion in fiscal 2007. Customers include Wal-Mart Stores Inc. and Yum! Brands Inc.'s KFC restaurant chain,

The shares slumped 38 percent yesterday, a record, before trading was halted on the New York Stock Exchange. The company's long-term debt stood at $1.52 billion as of June 28, according to a filing with the Securities and Exchange Commission. Independent rating company Egan-Jones Ratings Co. cut its rating on Pilgrim's Pride to ``CCC'' from ``B-'' on Sept. 24.

Mexican Plants

Pilgrim's Pride, also the second-largest chicken producer in Mexico, has about 53,000 employees in that country and the U.S. It operates 36 chicken processing plants and 12 prepared food facilities, according to its Web site.

On July 29, Pilgrim's Pride posted its third consecutive quarterly loss as record corn and soybean prices continued to increase the cost of raising poultry.

Pilgrim's Pride said in July its feed-ingredient costs for corn and soybean meal rose $266 million, or 41 percent, in the third quarter from a year earlier.

To contact the reporter on this story: David Altaner in London at daltaner@bloomberg.netMark Herlihy in London at mherlihy1@bloomberg.net.

Last Updated: September 25, 2008 04:32 EDT