Knudsen to Sell Phoenix Plant for $4.7 Million

Knudsen, the largest dairy in the West until it sought protection from its creditors under federal bankruptcy laws in September, is selling its Phoenix milk plant and is working on deals to sell plants in five other states, the firm’s creditors were told Monday.

Knudsen agreed to sell the Phoenix plant to Dillon Cos., a unit of Cincinnati-based Kroger Co., for $4.7 million, Knudsen Chief Executive John P. Brincko said at a meeting of unsecured creditors. The Los Angeles-based dairy has also received two bids for its Hawaiian milk plant and expects to sign a sale agreement next week, Brincko said. The sale must be approved by the bankruptcy court.

Knudsen, known to generations of Californians for its cottage cheese, milk and yogurt, has already sold most of its California operations to Kraft Inc. and Hughes Markets for $68 million but continues to operate plants in other states.

All Debts May Not Be Paid

Knudsen lawyer Stephen P. Feldman acknowledged that there may not be enough money left after the sales to fully pay the unsecured creditors. “I don’t believe the asset values left to be disposed of will pay all the debts,” he said.

Since it filed for bankruptcy court protection, Knudsen has reduced the secured debt to its bankers, led by Citicorp Industrial Credit Bank, to $60 million from $150 million, mostly with the proceeds from asset sales. Knudsen’s unsecured creditors are owed about $80 million. FD Partners, a group of secured creditors who sold Foremost Dairies to Knudsen in 1985, are owed about $40 million.

Brincko identified the two bidders on the Hawaiian milk processing plant as Southland Corp. and a group led by managers of the plant. Feldman said Knudsen expects to realize around $10 million on that sale.

Brincko said he expects to sell Knudsen’s Globe Extracts flavorings business in two months and its central division, consisting of milk plants in Texas, Louisiana, Missouri and Arkansas, within one month.