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Dean Foods receives court approval to use DIP financing

Customers receiving uninterrupted supply as access to funds will help support normal business operations.

Dean Foods Co. said Thursday it had received approvals from the U.S. Bankruptcy Court for the Southern District of Texas for the “First Day” motions related to the company’s voluntary Chapter 11 petitions filed on Nov. 12, 2019.

The court granted Dean Foods interim approval to access up to $475 million of the $850 million in committed debtor-in-possession (DIP) financing from certain of its existing lenders, which, along with cash on hand and operating cash flows, is expected to be sufficient to support the company’s continued operations during this process. Among other things, the court authorized the company to continue paying employee wages and benefits without interruption and making payments to suppliers and vendors in full under normal terms for goods and services provided on or after Nov. 12, 2019.

“We appreciate the swift action by the court to approve these motions, which will enable us to continue operating as normal,” Dean Foods president and chief executive officer Eric Beringause said. “As we move through this process, we remain focused on providing customers with wholesome, great-tasting dairy products and the highest levels of quality, service and value. I would also like to thank our employees, customers, dairy providers, lenders and other partners for their continued support.”

News of the dairy industry’s largest company filing bankruptcy rocked the sector early this week, but dairy industry leadership and stakeholders have vowed to help support the industry as Dean Foods determines its next step.

Following the news, the International Dairy Foods Assn. (IDFA), which represents approximately 90% of the milk, cheese, ice cream, yogurt and dairy ingredients produced in the U.S. and sold throughout the world, said it was still assessing the impact of the news but was working to ensure that the dairy industry will continue to meet growing demand for dairy products.

“The fact remains that overall consumption of dairy products is at historic levels, and demand for dairy in the United States and around the world increases each year,” IDFA president and CEO Michael Dykes said. “We will work across the industry to ensure farmer cooperatives remain competitive, dairy processors have a reliable supply of milk, retailers and grocers continue to put milk on the shelf and consumers continue to make milk and other dairy products a key part of their diet.”

He added, “Fortunately, consumers are turning more and more to the goodness of dairy, because it is delicious, nutritious and affordable, and our industry will work together to ensure this positive growth story continues.”

The National Milk Producers Federation told Feedstuffs this week that many of its member cooperatives provide milk to Dean Foods and could be affected by its bankruptcy filing. It added, “We will work closely with our members to provide whatever support we are able to through this process.”

Dairy Management Inc. (DMI) reiterated this week that the U.S. dairy community remains a “strong and diverse sector.”

In fact, DMI relayed that the industry has achieved consistent growth in per capita dairy consumption for 25 years in a retail category worth more than $100 billion and that domestic dairy sales were up 2.5% as of August 2019. Cheese and butter are also at all-time consumption highs, it added.

Ongoing pressure from competing beverages have been affecting fluid milk sales, but DMI said it still remains a staple in 94% of U.S. households. Further, some segments have been showing strong growth in what is a $13.4 billion retail category.

“In whole milk categories alone, there has been almost a billion dollars in growth over the last three years,” DMI noted. “We’ve seen pockets of growth in lactose free as we’ve addressed the digestive concerns from consumers, and in flavored milk, we’ve seen growth with innovation and the proof that chocolate milk is the perfect post-exercise recovery beverage on the science side.”

DMI expressed confidence that, in a decade shaped by a constantly changing marketplace, “U.S. dairy has and will continue to successfully navigate the current economic environment.”

TAGS: Business
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