990322 Thorn Apple Files For Chapter 11

Southfield, MI - Meat processor Thorn Apple Valley Inc., short of cash after a costly recall of possibly contaminated hot dogs, said it filed for Chapter 11 bankruptcy protection.

Southfield, MI-based Thorn Apple in January recalled about 30 million pounds of hot dogs because of possible contamination with the deadly listeria bacteria, the largest such recall on record. There have been no confirmed illnesses linked to the hot dogs.

“This recall left us with a short-term cash problem that necessitated the filing for protection under Chapter 11,” Joel Dorfman, president and chief executive officer, said in a statement. “We expect this filing will allow us to continue to operate, meet our sales needs and provide for our more than 3,000 employees.”

Still, Thorn Apple's financial problems pre-date the recall. Last June, the company said it was exiting the fresh meat business that had contributed to losses in 1996 and 1997 and would instead focus on higher-margin processed meats. Since then, Thorn Apple's stock has tumbled from just over $12 a share to Friday's low of 25 cents.

The company again posted a loss in fiscal 1998, but had said in September it hoped to be marginally profitably in its fiscal year ending May 1999.

Thorn Apple said it was in the process of hiring investment bank Peter J. Solomon & Co. to seek financing or to try to sell the company's assets. Shares of Thorn Apple closed down 31.25 cents at $0.75 on the Nasdaq Bulletin Board.

Thorn Apple also cited economic turmoil in Russia -- a major destination for Thorn Apple's exports -- as a cause of its financial problems. The collapse of the Russian rouble cut the buying power of consumers in that nation, forcing them to scale back purchases of meat and other items.

Listeria causes the food-borne illness listeriosis, which can kill infants, the elderly, and people with weakened immune systems, and can also cause miscarriages. A listeriosis outbreak linked to meat produced by a unit of Sara Lee Corp. has been blamed for the deaths of 14 adults and six miscarriages or stillbirths.

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