Borden Dairy Co., a milk producer that has been operating for more than 150 years, was called out by a lender for announcing a "value-destructive" bankruptcy filing on Monday, The Wall Street Journal reported.
Borden Lender Calls Move 'Economically Irrational'
The credit arm of KKR & Co. said in court papers that Borden has "no economic justification" for declaring bankruptcy, WSJ reported.
The decision may have been made to benefit Borden's its private equity backer Acon Investments, KKR said.
KKR acted as lender to Borden under a $175-million term loan and argued the milk company had an "almost fully-baked out-of-court restructuring solution."
Instead, the company chose to undertake the "economically irrational" move of declaring bankruptcy without identifying a financing source so the company can continue operating, the lender said.
KKR and another lender, PNC Financial Services Group Inc (NYSE: PNC) both allege Borden filed for bankruptcy without giving them advance notice.
Borden Says Lender 'Deeply Misinformed'
KKR is working under the assumption that Borden's bankruptcy "seems to boil down to somehow using the bankruptcy process to negotiate a transaction that will be more advantageous to Acon."
Acon, on the other hand, told WSJ Pro Bankruptcy that the decision to file for bankruptcy was based on a committee of two independent directors. Acon also said it has seen no financial benefit from the filing.
A Borden spokesperson told WSJ "it is safe to say that KKR's assertions are at a minimum deeply misinformed."
What's Next For Borden
Borden's CEO Told WSJ Pro Bankruptcy the company hopes to move through the bankruptcy process as quickly and efficiently as possible.
The CEO previously told WSJ that Acon would retain a primary ownership stake in the business after the bankruptcy process.