Major SoCal poultry processor in bankruptcy

Posted by Christine, September 24, 2010

By Lisa M. Keefe on 9/24/2010

P&C Poultry Distributors Inc. — and its affiliate, Custom Processors Inc. — have filed for Chapter 11 bankruptcy, according to court documents, and is fighting tooth and nail with its sole supplier, which it has accused of harassment. The $50 million (revenues) company supplies fresh and frozen products for resale to quick service and fast casual dining chains, including CKE Restaurants, Yum! Brands and Carlson Cos., the parent to T.G.I. Friday’s.

P&C buys the raw materials, and manages the warehousing and distribution of the finished product; Custom Processors does the processing and the manufacturing. The petition indicates the companies operate 24/7, and process 1 million pounds of raw product weekly. Both City of Industry, Calif.-based companies filed for Chapter 11 bankruptcy in late August, and the two cases are being jointly administered in the courts.

A mid-summer drop in sales combined with rising raw products prices due to the summer heat wave in the Southern states set off a cash crunch at P&C, the company’s executives say in their petition. Payments to its single supplier, Lawrence Wholesale, slowed, and P&C owed that company about $12 million by the end of July. Lawrence sued for breach of contract in early August.

An agreement to settle the outstanding debt was reached in August, but P&C’s bank did not approve the arrangement. Neither did the lender approve any cash infusions, and the bankruptcy petitions followed. Since the bankruptcy filing, which placed an automatic stay on Lawrence’s claims, Lawrence Wholesale officers have “engaged in a campaign of harassment of P&C,” the family that owns P&C and against Resource Sales & Marketing (RSM), a broker and distributor of chickens and chicken products, with whom P&C has arranged for vendor financing of about $2.5 million. Lawrence Wholesale’s representatives have called RSM executive to “implore [them] not to work with the debtors, otherwise not to support the debtors’ bankruptcy cases, and not to honor his contracts and commitments to the debtors,” according to the complaint.

P&C is asking the bankruptcy court to rule that Lawrence Wholesale must stop the alleged harassment, and is seeking a temporary and permanent injunction against Lawrence’s claims in its August lawsuit. Lawrence Wholesale’s owner, Mark Liszt, told Meatingplace, “There will be a response [to the harassment allegations] at the appropriate time and place.” Calls to P&C Chairman and CEO Michael Bennish were not returned.

Other creditors in the P&C/Custom Processors case include American Express Co., Bearings & Drives Inc., Consolidated Packaging, Griffith Laboratories Inc., Knight Refrigerated LLC, Leyen Food LLC, Precision Refrigeration and Air Conditioning Inc., Solomon Ross Grey & Co., and Timber Lake Foods Inc.

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