Farmland cleared an initial hurdle for its Chapter 11 reorganization Wednesday when the U.S. bankruptcy court approved $306-million Debtor-in-Possession (DIP) financing.

The DIP financing will come from a group of major banks let by Deutsche Bank, Farmland’s primary lender.

“This is an important first step regarding our financial stability as we begin our restructuring,” said Farmland CEO Bob Terry in a statement. “Approval of this financing allows us to maintain our regular business activities while reassuring our stakeholders that Farmland will continue to meet our post-petition financial commitments in a timely way.”

The court also approved the payment of wages, salaries, reimbursable employee expenses, and medical and other employee benefits incurred prior to and after the bankruptcy filing.

Kansas City-based Farmland Industries and four subsidiaries &045; Farmland Foods, Farmland Pipe Line, Farmland Transportation and SFA &045; filed for Chapter 11 bankruptcy protection on May 31.

Total debts of those companies amount to $1.9 billion.

The scope of reorganization has not been announced yet, though the company has already closed down 16 convenience stores in Arkansas owned by SFA, displacing 180 employees.

Terry and the reorganization team led by newly appointed Vice President Dennis Alt will examine the cost structure of entire system and implement a major restructuring.

Though Terry said that profitable meat production, including packing operations would not be considered for any cost reduction. The decision on building a new plant in Albert Lea to replace an old factory lost in the July fire is still contingent on an insurance settlement.

The court also authorized Seattle-based Bankruptcy Management Corporation to help Farmland administer creditor claims. BMC will serve as Farmland’s agent, providing notices, claims processing, balloting and other support services. Creditors can get information concerning filing a claim, accessing copies of pleadings or receiving notices of upcoming court actions through the BMC Web site at www.bmccorp.com.