Zacky Farms Files Bankruptcy, Cites Cost of Poultry Feed

Zacky Farms LLC, a Fresno, California-based poultry producer, filed for bankruptcy with plans to sell itself to pay creditors owed as much as $100 million.

The closely held company blamed the filing on heavy debt and soaring feed costs in papers filed in U.S. Bankruptcy Court in Sacramento, California. Zacky listed as much as $100 million in assets.

“Normal operations and customer service will continue without disruption,” Zacky officials said today in a statement.

The poultry industry has been under “severe stress due to historically high corn and soybean meal prices” leading to “significant operating losses” in its turkey and chicken business, the company said.

Global food prices tracked by the United Nations will climb to a record by June as droughts in the U.S., South America and Russia push up animal-feed costs, spurring meat and dairy farmers to reduce herds, according to financial-services provider Rabobank International.

The worst U.S. drought in 56 years sent the price of corn, the main ingredient in livestock feed, to a record $8.49 a bushel on Aug. 10 on the Chicago Board of Trade. The UN’s gauge of 55 food items reached a six-month high in September.

Operating Loan

Zacky spends about $1.8 million a week on feed for about 1.9 million turkeys and 600,000 chickens, according to court documents.

Starting in April, the company tried to avoid bankruptcy by borrowing $7 million from the Robert D. Zacky and Lillian D. Zacky trust, which owns half of Zacky, court papers show. Family members related to Albert Zacky own the other half.

Zacky needs to borrow $71 million at a 6 percent interest rate to operate in bankruptcy, according to court papers. The so-called debtor-in-possession loan is being made by the Lillian Zacky Family Trust, the company said in a statement.

The loan, which must be approved by U.S. Bankruptcy Judge Thomas Holman, requires “the commencement of an immediate process to sell the company as a going concern,” Zacky said in court papers filed today.

The company filed its case yesterday under Chapter 11 of the U.S. Bankruptcy Code, which is used for companies that plan to reorganize and continue operating. The filing was made public today.

Biggest Creditors

The two biggest unsecured creditors listed in the Chapter 11 bankruptcy petition were Western Milling, of Goshen, California, owed $6.6 million, and Foster Farms LLC, of Livingston, California, owed $1.2 million.

Zacky Farms traces its roots to Samuel Zacky, who emigrated to the U.S. in 1908 from Kiev and in 1928 opened a live-chicken store in Los Angeles, according to the company website. In 1979, the company opened a Fresno plant capable of processing more than 1 million birds a week.

The case is In re Zacky Farms LLC, 12-37961, U.S. Bankruptcy Court, Eastern District of California (Sacramento).

To contact the reporters on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net; Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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