American Rice Files for Bankruptcy

American Rice Inc. said it filed for Chapter 11 bankruptcy protection after problems from a breach of contract in Saudi Arabia last year kept the company from being able to pay its growers and debtors. American Rice, one of the largest branded rice companies in the U.S., filed for Chapter 11 bankruptcy in Corpus Christi, Texas. Houston-based American Rice is a unit of Los Angeles-based Erly Industries Inc. American Rice spent $5 million to create a short-term distribution system to protect its branded market after Rice Milling & Trading Investments revoked an agreement in January 1997 that allowed American Rice to use its distribution facility in Jeddah, Saudi Arabia. American Rice said it will sell its olive business for about $45 million to Early Food Acquisition Corp. to reduce debt and refocus the company on rice. The sale is part of its reorganization and is subject to court approval. American Rice shares were unchanged at 25 cents before trading was halted on the Nasdaq market.