August 22, 2019
Oregon-based NORPAC Foods Inc, a cooperative owned by over 140 members and the “largest processor” of frozen vegetables and fruits in the Pacific Northwest, filed for bankruptcy earlier this week (along with two affiliates) with a plan to effectuate a $149.5mm asset sale to stalking horse, Oregon Potato Company.* The sale price clears the first lien debt by over $25mm (subject to the adjustments), leaving potential recoveries for unsecured creditors. SierraConstellation Partners LLC is quarterbacking the sale effort for the debtors.
The debtors have lined up a $102.5mm DIP credit facility commitment from pre-petition secured lender, CoBank ACB, which will constitute a roll-up of $87.5mm of pre-petition revolving commitments and provide $15mm of incremental new liquidity to fund the cases and help fund the sale process in-court.
On the asset side, the debtors claim to have had over $310mm in sales for each of the last three years. The debtors own and operate two raw processing plants in Oregon, another in Washington, and a packaging plant in Oregon. Each plant has cold storage facilities. They have a customer base of over 1,250 buyers worldwide, powered by a supply chain of over 220 contract growers spanning more than 40k acres.
On the liability side, the debtors employ over 2000 people and are one of the largest unionized agricultural employers in Oregon, with approximately 2,000 union members; they are party to four pension plans, one as a single-employer sponsor and three multi-employer plans. They also owe their top 20 unsecured creditors in excess of $10mm. While, again, the debtors state that they’ve done over $300mm in sales over each of the last three years, they were nevertheless “in default in the performance of their obligations under the Credit Agreement” and have been operating under a series of forbearance agreements for months. And clearly CoBank has no interest in owning this company. Therefore, the debtors have been in a state of marketing since May of 2018.
Pursuant to the proposed DIP, the debtors hope to have consummated the sale prior to the end of October.
While the bankruptcy papers do not blame tariffs for the filing, one cannot help but wonder whether the bankruptcy dockets will soon be replete with ag-based debtors given the intensifying trade war. Per The Hill:
The National Farmers Union (NFU) on Friday hammered President Trump over his escalating trade war with China, saying he is “making things worse.”
“[I]nstead of looking to solve existing problems in our agricultural sector, this administration has just created new ones. Between burning bridges with all of our biggest trading partners and undermining our domestic biofuels industry, President Trump is making things worse, not better.”
Oy. The bright side? What may be a tsunami for growers may be a boon for West Coast restructuring advisors like SierraConstellation.
*The purchase price is subject to adjustments on account of the value of accounts receivable, the value of inventory, less the amount due to growers at the closing of the 2019 crop.
Jurisdiction: D. of Oregon (Judge McKittrick)
Capital Structure: $124mm credit facility (CoBank ACB)
Legal: Tonkon Torp LLP (Albert Kennedy, Timothy Conway, Michael Fletcher, Ava Schoen)
Financial Advisor/CRO: SierraConstellation Partners LLC (Winston Mar)
Claims Agent: KCC (*click on the link above for free docket access)
Other Parties in Interest:
Pre-petition & DIP Lender: CoBank ACB
Legal: Faegre Baker Daniels LLP (Michael Stewart, Dennis Ryan) & MIller Nash Graham & Dunn LLP (Teresa Pearson)