Courtesy Paloma Ayala/LightHawk
A major farm lender is arguing bankruptcy protections shouldn’t stop the liquidation sale of cattle owned by a controversial Oregon dairy that’s become financially unsustainable.
Since starting operations a year ago, Lost Valley Farm of Boardman, Ore., has encountered serious financial and regulatory problems that now threaten its survival.
The company’s owner, Greg te Velde, recently filed for Chapter 11 bankruptcy protection to halt the foreclosure of property at his three dairies in Oregon and California while he restructures debt.
By filing a bankruptcy petition on April 26, te Velde was able to cancel an auction of Lost Valley Farm’s 14,500 cattle scheduled for the next day.
Rabobank, one of his main creditors, had previously convinced an Oregon judge to order the auction because te Velde had defaulted on $67 million worth of loans for which the cattle served as collateral.
Because te Velde isn’t able to meet financial obligations to feed, water and otherwise care for the cattle, the herd’s value is at risk of declining, according to Rabobank.
Rabobank is now seeking “relief” from the automatic stay of te Velde’s property foreclosure under bankruptcy law to allow for an auction and avoid “potentially catastrophic consequences” to its collateral at Lost Valley Farm.
A bankruptcy judge will consider the motion at a hearing set for May 8 in Fresno, Calif., during which te Velde will also ask to use cash that serves as collateral for debt.
Te Velde said he had no comment about Rabobank’s claims and Capital Press was unable to reach the attorney representing him in the bankruptcy case.
After several loans went into default, Te Velde had the opportunity to restructure his “massive debt load” during a “lengthy” forbearance agreement that expired at the end of 2017, but he never developed such a plan, according to Rabobank.
In its court filing, Rabobank claims te Velde’s “erratic and unreliable” behavior is caused by “habitual” use of methamphetamine, which prompted a subsidiary of the Tillamook County Creamery Association to cancel its milk-buying contract with the dairy.
Te Velde has “no cash on hand” and wouldn’t be able to continue operating his dairies without $4 million in advances from Rabobank to pay for feed, water and labor at the facility, according to Rabobank’s filing.
“While Rabobank will act responsibly to protect the value of the LVF herd, Rabobank is not willing to finance the drug-addled fanciful dreams of this Debtor during a lengthy Chapter 11 case that involves about 24,000 cows, 28,000 other head of livestock, three dairies in two states and about $160 million in total debt,” the company said in a court filing.
Rabobank claims that te Velde checked out of a drug rehab clinic in April to convince Columbia River Processing — the Tillamook creamery’s affiliate — to reinstate the milk-buying contract, but then returned to the facility.
“As a regulated financial institution, Rabobank cannot continue to lend to a borrower in this condition,” the company said.
Patrick Criteser, CEO of the Tillamook creamery, submitted a declaration in support of Rabobank’s request and stated the company has withheld milk proceeds from Lost Valley Farm due to agricultural service liens filed by other unpaid creditors.
The subsidiary, Columbia River Processing, or CRP, is buying milk from the dairy to until Rabobank is able to conduct an auction but will stop after May 31, Criteser said.
“In no event, however, is CRP willing to continue to accept and pay for milk from the dairy on an ongoing basis, other than that for a short period and solely to facilitate an auction of te Velde’s herd,” he said.