US milk producer Dean Foods, along with its subsidiaries, has initiated voluntary Chapter 11 reorganisation proceedings at Southern District of Texas.

The company will use bankruptcy protection to support its existing business operations and deal with debt and unfunded debt obligations.

The company operates 60 processing facilities across the US and owns popular brands such as Land O’Lakes, Organic Valley and Dairy Pure.

Commenting on the decision, Dean Foods president and CEO Eric Beringause said: “Despite our best efforts to make our business more agile and cost-efficient, we continue to be impacted by a challenging operating environment marked by continuing declines in consumer milk consumption.”

The company also revealed that it is in involved in advanced discussions with Dairy Farmers of America (DFA) to sell the company along with its associated assets.

If the talks with DFA materialise, Dean Foods is expected to fetch higher or otherwise better offers in the bankruptcy.

The company’s existing lenders led by Rabobank have committed to providing nearly $850m in debtor-in-possession (DIP) financing to Dean Foods.

Using the DIP financing, as well as the available cash in hand and operating cash flows, Dean Foods intends to continue the business operations after court approval.

Beringause added: “Since joining the company just over three months ago, I’ve taken a hard look at our challenges, as well as our opportunities, and truly believe we are taking the best path forward.

“In recent months, we have put in place a new senior management team that not only has considerable experience in the dairy and consumer product industries but also in executing major turnarounds.”