Knudsen Gets Funding for Its Day-to-Day Operations

Knudsen Foods, the West’s largest dairy, said Friday that its lenders have agreed to lend the financially troubled company up to $20 million a week, enough to continue its day-to-day operations.

Knudsen said its banker, Citicorp Industrial Credit Bank, would review the loan each week. “Although the loan is on a week-to-week basis, we now have the flexibility to plan ahead,” said Ted D. Nelson, chairman of Winn Enterprises, Knudsen’s parent. Citicorp had previously agreed to fund Knudsen’s operations through Sunday.

The agreement, reached late Friday afternoon, followed a week of intense negotiations between Knudsen executives, its bankers and its suppliers. It relieved dairy farmers, who were told early Friday that Knudsen might not be able to pay full price for milk after Sunday.

Ruby Uliana, manager of Cal-Dari, a Modesto cooperative, said that dairy farmers would have had little choice but to deliver the milk to Knudsen and take a loss.

Knudsen, which missed an $18-million milk payment on July 15, has been paying dairy farmers for milk on a cash-on-delivery basis since July 16 to ensure the company a continued supply of milk. The company faces an involuntary bankruptcy action, filed by International Paper and two smaller suppliers who claim that they are owed more than $5 million.

Meanwhile, dairy industry and state government officials planned to meet Tuesday in Sacramento to look for ways to keep the ailing dairy company open, according to Assemblyman Rusty Areias (D- Los Banos). “We want to make sure that whatever happens, the milk continues to flow to market,” he said.