Debt Claims Two Dairy companies

7 minutes

Can't make the payment? We'll see you in bankruptcy court.

And that's just where the nation's two largest milk producing companies are right now: in bankruptcy. Dean Foods, the distributor of the popular “Land O Lakes” Dairy Products and Borden's the 150 year old privately owned milk company are currently in bankruptcy.

And a quick check of their respective balance sheets will tell you why. Dean Foods, has 3 times more debt, than it has shareholder equity. And for Borden's the debt level is 5 times greater than their equity.

Now when times are good, and sales are rising, this much debt can be manageable (although I would never suggest it). But when times turn down, and sales falter: That's when the debt burden becomes overwhelming, and you end up like Dean Foods or Borden.

Or to paraphrase Warren Buffett: Its when the tide goes out, that you find out who doesn't have swim trunks.

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