Agriprocessors Sale Will Leave Little To Nothing For Unsecured Creditors, Workers

Unsecured creditors owed $22 million, unlikely to recover anything.

Agriprocessors sale could leave little for creditors
By Dave DeWitte • The Gazette

The Rev. Richard Gaul performs a blessing of the Agriprocessors plant and the crowd during a march to the Postville plant’s front gate May 12, the anniversary of the immigration raid. Creditors may lose money on the sale but could pick up business if the city’s biggest employer is restored. 

Hundreds of Agriprocessors’ creditors could walk away empty-handed if a deal proposed by a bankruptcy trustee to sell the company for $8.5 million is approved.

The sale price is so much less than the company owes its creditors that observers say there will likely be nothing for more than 400 unsecured creditors. Creditors with a security interest in plant equipment will have to negotiate the best deal they can with buyer SHF Industries Inc.

SHF, a new company formed by Montreal businessman Heshey Friedman and two associates, has agreed to pay the $8.5 million to two of Agriprocessors’ largest secured creditors — First Bank Business Capital of St. Louis and the credit arm of Metropolitan Life Insurance.

Craig Bodley of Bodley Equipment & Repair in Postville, a three-person metal fabrication and repair shop, is owed several thousand dollars by the town’s biggest private business. It has no security interest in the plant’s real estate, buildings or equipment to use as leverage in trying to collect the debt.

“I was kind of hoping they’d get a little better price for it than that and they’d be able to cover some of the debts,” Bodley said. “It sounds like the secured creditors will get it all. I don’t even know if it will be enough to take care of all of them.”

More than 400 unsecured creditors are owed more than $22 million in the case, according to Bradley Kruse, the Des Moines attorney representing the unsecured creditors committee in the Agriprocessors bankruptcy. He said creditors don’t have all the information they need to evaluate the sale terms, but it appears they would get nothing.

Despite that, Kruse said it’s possible that unsecured creditors will not object to the sale. That’s because an auction of the company’s assets in March lowered creditors’ expectations of what the troubled kosher meat processor is worth to potential buyers and because many creditors might benefit from a successful buyout of the company.

Going into the March auction, Soglowek Nahariya Ltd. of Israel was prepared to offer $40 million for Agriprocessors. Soglowek was positioned as the “stalking horse bidder” against which other bidders would compete. But Soglowek backed out of the process before the auction began, telling a bankruptcy trustee it couldn’t complete an asset purchase agreement in time because it couldn’t fully investigate the company.

Kruse said the bankruptcy court is expected to hold another auction with SHL as the lead bidder. The result could yield a better price for the company than SHL offers — or no bidders at all.

Creditors must weigh the disappointment of receiving nothing for the services or goods they provided Agriprocessors against the possibility that the plant, currently operating at low volume, could be closed permanently.

“They are hoping for new owners that will keep the plant in Postville and be a valuable ongoing customer that the past creditors can trade with in the future,” Kruse said.

SHL hasn’t contacted the city of Postville, according to City Clerk Darcy Radloff. The city is struggling to meet payments on a government loan it took out to build a wastewater treatment plant to serve Agriprocessors.

The city is owed about $24,000 in pre-bankruptcy debt by Agriprocessors. Wes Huisinga, the city’s attorney in the case, said it’s possible the city could work with the company to seek a reduction in its loan payments to the government. He said restoring the city’s biggest private employer would also help the city financially by filling up many vacant rental properties, the owners of which cannot pay their utility bills.

Major unsecured creditors include Alliant Energy, Sealed Air Cyrovac of Cedar Rapids and Jacobson Staffing of Des Moines.

The thing most notable about this article isn't that unsecured creditors will get nothing. That was clear the minute the sale was announced. The most notable thing It is that Dave DeWitte, whose reports often are nothing more than rewritten press releases from Agriprocessors trustee, did not mention the hundreds of former employees owed hundreds of thousands of dollars by Agriprocessors and the impact this deal will have on these very poor people, many of whom were also cheated by Jacobson Staffing and thrown into the cold by Alliant Energy.

Many of these workers will not get their jobs back and none of them will see a cent of the money owed them.

At the same time, neither Postville or the State of Iowa have taken steps to ensure the new owners don't do what Agriprocessors did, both under Rubashkin rule and under the rule of the court appointed trustee – play bait and switch with employees, hire them at a competitive rate of pay and then drop their rate of pay dramatically after employees have moved into town and started work.

Most of these workers are too poor to leave when this happens and are forced to continue working for far less money than they were promised.

This is a problem with Iowa law that, quite frankly, no one in government cares to fix.

The way to get around it is to compel the new Agriprocessors to both publish their rates of pay and publish an employee handbook that contains pay grades and exact details of wages, promotions, and bonuses and file that handbook with the state and city.

That gives state officials a way to prosecute the company if it plays bait-and-switch with workers.

Another better way to deal with this problem is to have collective bargaining – in other words, a union. This also protects workers and does so in a stronger, safer way that relying on the state.

As far as I know, neither Postville or the State of Iowa have taken the first option or worked to achieve the second.

My guess is things will be a lot like they were under the Rubashkins.

They'll be plenty of blame to go around, the vast majority of which will rightly come to rest on city officials and state economic leaders, not one of whom really cares if poor workers go hungry.

If Upton Sinclair was alive today, Postville, Iowa would be his Jungle. 

Comments

[sage]

Yes!!!

And another thing to consider.

Once the Bankruptcy sale to SHL, G-d forbid, goes through, all creditor claims against the RCF become null and void.

The plan is to charge exorbitant rent for new SHL workers, forcing SHL to pay higher wages and force him out of business.

The RCF will purchase Agri for a rock bottom price. All this will be perfectly legal.

So when the RCF takes over, the Millions they owe to creditors and former workers will have been washed away.

Revolting, isn't it.

[Hometown Postville]

What a scary thought- is this inside info Sage, or speculation?

[FirstGenerationBavarianAmerican]

Even within the category of unsecured creditors, there is a pecking order in who gets paid first. I'll have to look into the details, but unpaid workers are high up on the list.

Trade creditors are at the bottom of the pecking order. But, they should be printing up new price lists for Agriprocessors.

The new owners must realize the creditors getting stiffed will try to get their money back, a little at a time. D&B can be their friend.

Should the Rubashkins take over control from SHF Industries, Iowa state, county, and local government agencies should go to the feds and have the Rubashkins investigated for looting the company and bankruptcy fraud.

[sage]

Hi HP,

My comment was speculation, but was based on long exposure to how the RCF operates and recalling the boast made by SMR some time ago, that in a few months the Rubashkins will be back in the saddle again.

[Minneapolis]

I am an unsecured creditor we have writen off what they owe us which is sad as i am sure SMR is more financialy secure right now than i am given the curent economic climate. i am hesitant to go agter business with the new owners given how we got screwed.

[Hometown Postville]

No matter how this plays out,the new owners will have to secure their livestock contracts much farther away from Postville, because locals will not sell to them unless it's cash upfront.Farmers won't care if they have to pay higher shipping to sell out of the area- after all, it's better than not getting paid at all! In addition, other local businesses serving the plant should do the same(cash upfront or a hefty deposit required). By the way, it occured to me that Mr. Ordinary Citizen get utility services cut off after x# days of non-payment. Why did local utilities allow month after month non-payment with no shut-offs? Policies perhaps these companies should review. All this while trying to build a business back up with a tarnished reputation. The new owners will have to get very imaginative about their labels to hide where it comes from. All in all,huge challenges for marketing, human resources, and acquisition departments. New employees looking for more reasonable rent don't have to be at the mercy of company-owned housing. They would be welcomed into surrounding smaller towns with significantly lower rents IF they would take care of the place and stay out of trouble. And for the future? Postville would be wise to adopt their own undercover watchdog system with hotlines to appropriate regulatory orgs and media so potential ethics issues can be promptly attacked and resolved before another crisis looms.

[sage]

Pertinent comment!!!

If all RCF screwed creditors boycotted the new business, especially the feed, cattle and chicken suppliers, that would be the end of Agri, as we have known it.

[Shmarya]

You're both wrong.

The cattle growers got paid by the feds. They're in effect insured.

Past that, suppliers will certainly do business with the new owners because they need the money.

[Curious Postville Native]

[Postville would be wise to adopt their own undercover watchdog system with hotlines to appropriate regulatory orgs and media so potential ethics issues can be promptly attacked and resolved before another crisis looms.]

. . . and this will be the case, I assure you! It is already in the works, for the benefit of all. Amen, Alleluia.

[Curious Postville Native]

Shmarya-

Do you know if the Packers and Stockyards Act would apply continually-if someone dared to trust a meat-packing facility known to be corrupt?

[Shmarya]

Yes.

[FirstGenerationBavarianAmerican]

Certainly, local businessmen can run a D&B on the companies the SHF partners own to see what their payment history is,

[sage]

+++ Past that, suppliers will certainly do business with the new owners because they need the money.

Posted by: Shmarya | June 25, 2009 at 08:34 AM +++

Maybe not.

The view of "Minneapolis" might be shared by other screwed unsecured creditors.

If I were one of them, I would demand payment of what is owed to me first, before doing any further business; this on a cash in full basis.

SHL does not fully understand, IMHO, what a horrible mess they propose to get into.

And the RCF will screw them, too, as it has done to countless others.

[Shmarya]

Please.

Minneapolis is far away from Postville. he has many other customers.

The people in Postville do not.

[Curious Postville Native]

Thank you for the responses-Shmarya & FirstGenerationBavarianAmerican.

It will be my stand to adhere to the classic saying -

"Fool me once, shame on you; Fool me twice, shame on me".

I will respond accordingly to all who are duped in the upcoming 'round'.

As for me-I am known to be PRO-Postville, all the way! If a situation does not promote a positive influence for the betterment of this unified community, in the best interest & encompassing the WHOLE Postville community, I am NOT interested in pursuing the support of the enterprise, regardless of whom. That is all.

[Hometown Postville]

CPN "...It is already in the works, for the benefit of all."
That's awesome! Perhaps even a hint of such a thing to the new owners will deter some of the unethical practices.

Shamarya: Glad to hear at least the cattle growers have been paid, the bread and butter of this business. And you're probably right, people will continue to do business with the company because alternative markets in a rural area are limited, however, I speculate those who choose to continue will aggressively pursue payment a lot faster than in the past.

[Minneapolis]

That is true, businesses in Postville may have no choice but to take a risk...again

[Dr. Dave]

By definition unsecured creditors are taking a major risk. Anyone holding GM or Chrysler common stock can attest to this.

At least the government isn't getting involved and giving away secured investors shares to whomever they see fit( in the case of the auto industry the UAW - a nicely marxist redistribution of the wealth to the workers - shout out to comrade obama)

[yidandahalf]

What is also "amazing" is the depth and breadth of collusion amongst Iowan businesses,local government and Agriprocessors. Turning a blind eye to the worst of the worst in hopes they would reap financial rewards, these creditors will most likely see nothing but more hardship which their shortsightedness has brought upon them. So many dirty hands and all of them empty now save for the Rubbishcans'.

[Curious Postville Native]

BTW- One-Force is back in town - . . . so much for the unsupervised Jewish students 'being safe'.

. . . and to think, I was the one who suggested - If the meat-pack closes, we might gain the support of colleges for the possibility of off-campus studies available to rural students. I also mentioned to YG, that Postville could be offered as a quaint location for advanced Hebrew &/or studies of the Torah.

No one in their right mind would send their children to an unsafe neighborhood to be educated amidst a small, midwestern city loaded with the outcasts of society.
i.e. - newly released prisoners, people, many mentally-ill, recruited from homeless shelters. I can't tell you how many came here via One-Force and the like; who after leaving the area where they were 'in the system', ran out of medication and 'went off the deep end' (with no means of refilling their necessary prescription). These are the people, parents inadvertently send their precious children here to comingle with, through a common presence, when commuting on foot/bicycle on the streets of Postville.

These are only a few of the 'characters' who are dumped here. As a parent, I can't help but to wonder- How many of these 'recruits' have sexually abused children?

I thank G_d that my family is nearly grown.

[state of disgust]

Cattle growers were paid by the Feds BUT ... it took a long time to get the money and as a result the growers took a financial loss. They had debts to pay and had to take loans to cover those debts.

What makes you think Agri will go back in the meat business? It is most likely they will stick to poultry processing. The poultry line is operating and it is more immediatly profitable. They may bring in sides of beef from Canada or Uruguay where they have better credit terms and cut up product in Postville, but it is doubtful they will go back to cattle slaughter for a while. Besides, they can get all the kosher meat they want economically from Canada.
The big issue for the new owners is distribution and shelf space. That may be the reason they keep the Rubashkin family around -- unless of course this entire sale is a front for the Rubashkin's to regain control of the plant.

[Pablo Faird]

It is definately a shame that the individuals owed money will not see any of it, however this is not the fault of anyone involved in the Agri purchase, that fault is on the heads of the Rubashkin family, who from an inside source are not at all involved. The trustee and SHF and whomever else is involved in the purchase are looking at it in a point of view as to how can they make this successfully work for the future. Obviously this was the best deal made available or the trustee would not have accepted the offer. There is now an opportunity for Postville to have a rebirth, and SHF is going to help make this happen, remember, before anything was finalized, SHF had to go through the Iowa AG, FBI and other authorative investigations, and it seems that all has checked out good. So here`s a l`chaim hoping that Agri and Postville will thrive once again!

[Curious Postville Native]

[unless of course this entire sale is a front for the Rubashkin's to regain control of the plant.]

The family presence, at the facility, is well-known by the people of this community. Hence, we are aware of the Rubashkin control, as always, of the facility.

[justice seeker]

" blame to go around, the vast majority of which will rightly come to rest on city officials and state economic leaders, not one of whom really cares if poor workers go hungry". Bull crap!

Sorry but you are wrong. Look at the popuation of Postville (2200 pre-raid), and the voting control of the Rubashkins. To blame the few long time residents who remain is silly.
With regards to cattle purchases some local sellers will still sell, but others won't. Even though they are in effect insured, no one wants to wait nearly a year to get paid. There are plenty of other buyers.
This whole mess should have been cleaned up years ago by one boycott...end of story. Instead you want to blame the few hold out residents of a town of 2200...meat packing population 1000+. Allamakee County has a population of 14,500 and Clayton County 18,700. New York didn't have much luck dealing with this family, the Kosher communtiy won't, and you want to foist blame on a rural area that lacks resources or experience.

Put the blame where it belongs squarely on the shoulders of the Rubashins, and the community that supports them.

Stop buying the meat and the problem would end.

[Pablo Faird]

I know SHF and can assure you that their goal is to regain the trust and credibility of both the Postville population and meat industry! If that means replacing personnel, I imagine that will happen.

[The sane one]

Is anyone really surprised this is happening? Was i right about a higher bid? I might be wrong. I seem to remember a bid for 14 million in the C.R. Gazette. If I'm right, why not them. Not Jewish?

[sage]

IMHO, SHF, in spite of the claim of their honest intentions, will be screwed by the RCF and be forced to sell the purchased assets back to the Rubashkins.

The RCF, as mentioned in an earlier post, controls 40% of the Postville real estate and will charge exorbitant rents, forcing SHF to pay higher salaries to the point of the business becoming unprofitable and not worth the effort.

Keep in mind the recent SMR boast, that the Rubashkins will regain full control in a matter of months. IMHO, it's not a boast that should be taken lightly.

[FirstGenerationBavarianAmerican]

Guys, all those Rubashkin real estate holdings in Postville are also in bankruptcy proceedings, in addition to the Agriprocessors stable of companies being spoken for by the receiver. That other gentlemen, whose name escapes me, also had his company go bankrupt.

[sage]

But does this mean that the RCF is prohibited from renting out the rental properties?

Also, why is Force One back in town?

This whole new paradigm seems strange and is difficult to compute.

[state of disgust]

Force One is back in town because they have been invited back to supply "workers."
Who did the inviting? Probably one of the Rubashkin's or an HR person working for the Trustee.
Nevel Properties were turned over to the bank which has contracted out their administration to I believe, Siebert. Technically, the Rubashkin's still own the company.

[sage]

Hi SOD,

Thanks for the info.

IMHO, these are part of the pieces for an eventual RCF takeover of SHF.

Please keep us tuned in as you discover more pertinent facts.

[Alex H.]

The controversy here is who shall pay the most. Often the bill goes to the last to leave the table as we see here... unsecured creditors and the workers.

My concern is for the workers. We traded low pay for no pay at all.

[yidandahalf]

Now we have a shill for SHF by the name of Pablo Faird no less. At twelve noon today we were graced with the first one ever "representing" Friedman, or Rubbishcan, or...?

[yidandahalf]

Where are Archie and Nachos?

[michael ben drosai]

"What a scary thought- is this inside info Sage, or speculation?"

It's like every single one of his posts - his own shoot from the hip, ignorant of the law and facts, wishful thinking. He was a lot more enjoyable when he waxed poetic about the good old days before the Flood

[michael ben drosai]

"My comment was speculation, but was based on long exposure to how the RCF operates "

well you're two-thirds right at least (about the speculation and long term exposure)

[sage]

+++ Force One is back in town because they have been invited back to supply "workers."
Who did the inviting? Probably one of the Rubashkin's or an HR person working for the Trustee.
Nevel Properties were turned over to the bank which has contracted out their administration to I believe, Siebert. Technically, the Rubashkin's still own the company.

Posted by: state of disgust | June 25, 2009 at 01:35 PM +++

Hi again, SOD.

Something here doesn't compute.

Nevel filed for bankruptcy and its properties were turned over the the creditor bank, after which the bank contracted out the administration of these properties to a company, presumably owned by the RCF.

IMHO, there's something very wrong with this picture.

If I'm in error, please enlighten me.

[Pablo Faird]

Sorry to burst your bubble Mr. Yidandahalf, however I do not represent SHF or RCF.

[Bruce]

Throughout history anybody dealing with jews gets screwed. People are very STUPID. They don't call it "GETTING JEWED" for nothing!!!

[Bruce]

Anybody that earned a penny (OR HELPED IN ANY WAY) the Rubashkins,Agriprocessors,the illegal aliens is a criminal in my eyes. After the raid there was a woman teacher that was worried that the government was not going to finish paying her college student loans because there wasn't any illegal alien kids to teach anymore. The point is that this greedy bitch was squaking about not getting free Government money. A true liberal!!!