Trustee comes under fire.
No bankruptcy sale plan emerges for Agriprocessors
Trustee may have to seek alternative funding
Lynda Waddington, Iowa Independent
Despite attempts to paint two days’ worth of discussions by potential bidders and creditors of the Agriprocessors meatpacking plant as “progress,” there is little denying the frustration and tension that were present in the courtroom when no potential sale could be presented to the court.
“Right now there remains a prospect for having a buyer come in and buy the plant, which is what the city continues to hope for,” Wes Huisinga, an attorney representing the city of Postville, told Iowa Independent following the hearing in Cedar Rapids.
“I see this as, hopefully, just a delay,” he said. “We will continue to be hopeful that some sort of an agreement can be reached … It’s too big of an asset to just not have it operating anymore.”
Continued operation or, more aptly, being able to have a bankruptcy sale for an existing and functioning meatpacking plant, was the chief concern of those exiting the courtroom.
Dan Childers, an attorney representing the trustee, told Judge Paul Kilburg and those assembled in the courtroom that negotiations had stalled when creditor First Bank Business Capital of St. Louis refused to “come on board” with any of the hashed-out bid proposals. In addition, First Bank, which provided roughly $10 million in additional funds to keep Agriprocessors afloat during the bankruptcy proceedings, indicated it no longer wished to finance the endeavor if a satisfactory deal was not reached.
“We, perhaps more than anyone, have contributed to the effort to find real-life value for this estate in addition to our pre-petitioned debt,” Lloyd Palans, attorney for First Bank, told the court.
Palans indicated that he didn’t “want to say anything that might degenerate the trustee’s efforts” but also made clear that his client wanted to “leave open the opportunity for future arguments” if future proposals did not provide adequate compensation for his client.
Childers said that although no proposal was ready to be placed before the court, the trustee “believes that there are at least three viable options on how to proceed.” Following the hearing, Childers declined to elaborate on the three options.
Childers requested the hearing be conducted next week “in the event that we’re able to put together a package that is palatable with everyone.” He also stated that if and when “it becomes absolutely certain” no deal can be made he “would expect the trustee would bring forward some sort of financing motion as an alternative to First Bank.”
“The trustee will be pursing the possibility of other financing to maintain the operation so that there is no interruption of service of the company because it has already been disrupted enough in our view,” he said.
“We certainly don’t want to be in the position of not having any financing at all.”
Palans declined further comment following the hearing.
If bids placed during the auction on Monday or Tuesday morning changed, the details were not made public during the hearing.
Agriprocessors, once one of the largest employers in northeast Iowa, never fully recovered from a massive immigration raid in May that ended with roughly a third of the plant’s work force in custody. Several members of plant management face both federal and state charges, including Sholom Rubashkin, a former executive in charge of day-to-day operations and son of company founder A. Aaron Rubashkin.
Bank fraud charges against Sholom Rubashkin allege that he misappropriated payments received by the plant for the purpose of falsely inflating the company’s worth. The plant’s accounts receivables was the basis of the line of credit offered by First Bank to Agriprocessors.
The company, which briefly stopped all production last fall, filed for Chapter 11 bankruptcy protection in November. Limited poultry production quickly resumed under the tutelage of bankruptcy trustee Joseph Sarachek.