Farmland files for Chapter 11

New York, May 31 - Farmland Industries, Inc. said it filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code, blaming continued adverse market conditions in the nitrogen fertilizer business and recent increases in cash demands. The filing is with the Bankruptcy Court for the Western District of Missouri in Kansas City, Mo.

Farmland said it intends to continue to grow its successful foods businesses, sell non-strategic assets, further reduce debt and seek additional ways to cut costs. Workforce reductions will be included in the measures.

"We fought to pull ourselves through this time of tight liquidity," said Farmland president and chief executive officer Bob Terry in a news release. "Regrettably, we were unable to overcome one significant challenge - aggressive early redemption demands from our subordinated debt holders. This activity drained our cash liquidity and was expected to continue indefinitely.

"Our banks were hesitant to continue lending in the face of ongoing redemption payments to subordinate creditors."

Farmland said it obtained a debtor-in-possession facility from lenders led by Deutsche Bank.

Farmland noted it had warned in its quarterly filing with the Securities and Exchange Commission that it may have to seek protection from its creditors if conditions did not improve.

That warning led to increased cash demands, including demands for early redemptions of subordinated debt, which the company was unable to satisfy, the company said. Farmland is currently unable to sell new subordinated debt.

Farmland has $570 million of subordinated debt outstanding, held by 20,000 individuals.

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