A federal bankruptcy court judge has granted Borden Dairy Company permission to pay independent dairy farmers and dairy cooperatives for milk as the company works through the legal process of financial restructuring.
Natzke dave
Editor / Progressive Dairy

Borden filed for voluntary reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code on Jan. 5, in the U.S. Bankruptcy Court in the District of Delaware (Borden Dairy Company, et al. case number 20-10010). Read: Borden Dairy initiates Chapter 11 bankruptcy proceedings.

On Jan. 8, Judge Christopher S. Sontchi granted several interim court orders, addressing “first-day” motions submitted to the court by Borden on Jan. 6. Most of those interim orders allow Borden to continue day-to-day operations, including paying dairy farmers for milk. A final hearing on the motions is set for Jan. 23.

Dairy farmers are among “critical vendors” supplying Borden with goods and services necessary for continued operation. According to information submitted to the court by Jason Monaco, executive vice president and chief financial officer of Borden, approximately 67% of Borden’s total raw milk purchases are sourced from five dairy cooperatives, with the remaining 33% sourced from 262 independent family dairy farms. Borden is the sole purchaser of milk from 259 of those independent farms and is one of the largest purchasers of milk from the other three independent farms.

In general, the document noted, Borden pays for milk to be supplied in a given month on or around the 26th day of that month and then pays the balance owed on or around the 13th day of the following month. For example, for December 2019, Borden paid advances of approximately $13 million on Dec. 26, 2019, and owed approximately $19 million on Jan. 14, 2020, for the balance of the payment owed for milk delivered in December 2019.


Among the 415-page list of creditors are Lone Star Milk Producers, Dairy Farmers of America, Southeast Milk Inc., Maryland and Virginia Milk Producers, and Select Milk Producers. Those listed with largest claims against Borden are: Lone Star Milk Producers – $6.15 million, Dairy Farmers of America – $2.71 million, Maryland and Virginia Milk Producers – $2.34 million and Southeast Milk Inc. – $780,050.

Citing Borden’s recent plant investments and product innovation, dairy cooperative officials contacted by Progressive Dairy expressed surprise at the bankruptcy announcement.

So did lenders filing objections to several of Borden’s first-day motions related to use of cash collateral to pay outstanding debt. Court documents submitted by attorneys representing PNC Bank and KKR Credit Advisors said negotiations on an out-of-court restructuring agreement had nearly been completed between the lenders, Borden and its equity holder, ACON Dairy Investors. The lender attorneys termed the bankruptcy filing “reckless” and said there was “no economic justification” in the action.

Headquartered in Dallas, Texas, the company operates 12 manufacturing facilities and more than 75 distribution centers in the Midwest, South and Southeast regions of the U.S.

Plants are located in: Dothan, Alabama; Decatur, Georgia; Lafayette, Louisiana; Cincinnati and Cleveland, Ohio; Austin, Dallas and Conroe, Texas; Miami and Winter Haven, Florida; London, Kentucky; Hattiesburg, Mississippi; and North Charleston, South Carolina.

Borden produces 35 dairy products, including flavored and specialty milk, buttermilk, dips and sour cream, and markets them in more than 40,000 locations throughout the U.S. Among others, Borden’s customers include Walmart, Starbucks and Food Lion, as well as school districts across the country.  end mark

Dave Natzke