Updated December 02. 2008 12:48PM
Judge okays Agriprocessors restart
By Dave DeWitte
An emergency advance from a St. Louis bank that foreclosed on Agriprocessors will allow the company to resume operations this week in Postville, according to a court-appointed bankruptcy trustee.
The $2.5 million advance approved Monday in New York bankruptcy court will fund the processing of the company's existing inventory of 750,000 chickens and hens through Jan. 9. It also will provide a deposit to Agriprocessors' utility provider and allow the company to pay for its insurance.
Bankruptcy Trustee Joseph Sarachek said a meeting of employees is planned for tonight, and production could begin later this week.
The money will come from First Bank Business Capital of St. Louis, which is owed about $34 million by Agriprocessors. The bank has a practical reason for agreeing to fund operations. Without the money, the inventory of poultry would likely starve and become a net liability instead of an asset.
The budget calls for 140 production laborers working 50 hours per week through Jan. 9, 10 administrative staff, and four management staff. It also calls for 10 employees in the company's New York distribution center.
Chicken feed is one of the largest single item on the budget submitted by the trustee for court approval. totaling about $250,000 per week.
The budget also includes $47,000 per week for rabbis to supervise the slaughter to ensure compliance with kosher standards, and $150,000 for trustee fees.
Attorneys for Agriprocessors owner Aaron Rubashkin of Brooklyn, N.Y., opposed a change in venue to Iowa during a court hearing Monday in New York. They asked for more time in order to arrange financing to carry the company through bankruptcy.
Chief Bankruptcy Judge Carla Craig postponed the hearing until Dec. 12 in order to allow the company to seek financing. However prospects for financing may be dim in light of the company's existing debt, which is secured by most of its asset, and ongoing criminal prosecution of the company and some former employees and managers.
The allegations of criminal activity have already led to one forfeiture proceeding against life insurance policies taken out on the life of Aaron Rubashkin's wife that were allegedly paid for with company funds. The policies have a combined cash value of about $750,000.
The proceeding by the U.S. Attorney for the Northern District of Iowa maintains the assets are subject to forfeiture because they were ill-gotten gains arising from a criminal activity.
Note: I'm not sure the number of management mentioned above is correct. I think it may be a misreading based on reading the footenote (4) as the number of managers. I asked the trustee, Joseph Sarachek for clarification. I'll post that clarification if he responds.