Trustee spins web of smoke and mirrors to keep company afloat.
Still no deal in Agriprocessors auction
Dave DeWitte, The Gazette
A bankruptcy trustee hasn't given up on efforts to find a buyer for Agriprocessors one week after an auction of the company's assets stalled due to a balking creditor.
Four companies bid last week for the troubled kosher meat processing company, which has most of its operations in Postville. The bidding went up to over $15 million.
Agriprocessors owes large sums to many creditors, however. The creditors that made loans secured by buildings, equipment or inventory have a legal right to bid for those assets against other prospective buyers to ensure that they aren't sold for less than their value.
Last week's sale stalled when the largest secured creditor, First Bank Business Capital, refused to withdraw its own $20 million bid for a mix of assets securing its loans to the company.
An attorney for the bankruptcy trustee said on March 24 that he expected negotiations to continue with prospective buyers and creditors in an effort to reach a deal. Chief Bankruptcy Judge Paul Kilburg agreed to continue the hearing until this week to provide time for negotiations to play out.
No hearing had been scheduled Friday afternoon, but bankruptcy case trustee Joseph Sarachek of Triax Advisors indicated the effort wasn't dead.
"We're actively working with a number of buyers," Sarachek wrote in an e-mail.
If the efforts aren't successful, the trustee may have to find another lender. First Bank Business Capital has been financing the operations of Agriprocessors since it resumed operations under the trustee's supervision late last year. First Bank indicated at last week's hearing that it doesn't plan to continue extending financing to the company if a suitable deal isn't reached.
Agriprocessors filed for bankruptcy protection and suspended operations last year after a federal immigration raid in May brought the arrest or detention of about one-third of its work force. Subsequently, the company has been charged with a broad array of state and federal crimes, including bank fraud and child labor violations.
The deal didn't fall apart because First bank was acting in an unreasonable fashion. It fell apart for several reasons:
- Bids were very low, less than half of the $40 million stalking horse bid offered a few weeks ago.
- The two top bidders are unknowns.
- One appears to be a Rubashkin front. The other, a Delaware corporation formed a few days before the bidding, in a virtual unknown, and may also have Rubashkin ties.
- Part of the deal had secured creditors accepting promissary notes from these largely unknown bidders. Lender do not want to have to go through bankruptcy proceedings or foreclosures twice on the same debt, and having unknown bidders doesn't help lenders feel comfortable with the deal.
- The deal had First Bank getting a far smaller percentage of its money back than the other secured creditor, MetLife. MetLife is also owed significantly less than First Bank, making it easier for MetLife to take a bad deal.
If you go back and read Dave DeWitte's reports on Agriprocessors since Sarachek was appointed trustee, you'll see a clear patter of reporting that is little more than spitting out Sarachek talking points. It is shameful, and it does not speak well of the Gazette or its editors.
As for Sarachek, what we saw at the auction were three bidders. One, T5, owned by the Ghermazian brothers, was legitimate. The other two, probably not. None came close to the stalking horse bid. This is not exactly a stellar showing.