Courtesy Paloma Ayala, with aerial support from LightHawk.
A controversial Oregon dairy filed for Chapter 11 bankruptcy protection Thursday night, blocking an auction Friday to sell off its 14,500 cattle herd in Boardman, Ore.
The liquidation of Lost Valley Farm’s 10,500 cows and 4,000 replacement heifers was ordered in Oregon state court at the behest of Rabobank, a major farm lender seeking repayment for $60 million in defaulted loans.
However, the bankruptcy petition filed by Greg te Velde, the dairy’s owner, in the U.S. Bankruptcy Court for the Eastern District of California automatically stays all foreclosure actions by creditors, including the auction scheduled for April 27 at 11 a.m.
Under Chapter 11 bankruptcy, companies typically develop reorganization plans to restructure their debt. Te Velde declined to comment on the bankruptcy case.
Aside from Lost Valley Farm in Oregon, te Velde’s bankruptcy also encompasses his California dairy operations, Pacific Rim Dairy in Corcoran and GJ te Velde Dairy in Tipton.
Together, the dairies have more than 40,000 cattle that are listed as potential “hazard property” that poses a safety threat or requires immediate attention.
Te Velde’s companies owe between $100 million and $500 million to fewer than 1,000 creditors and have between $100 million and $500 million in assets, according to the bankruptcy petition.
A more complete accounting of his financial affairs is due in bankruptcy court by May 10.
Overland Stockyard, a dairy livestock auction in Hanford, Calif., is listed as te Velde’s largest unsecured creditor with a claim of $3 million, followed by Conway Hay Sales of Goshen, Calif., with a $2.9 million claim and Valmont Northwest, an irrigation equipment dealer in Pasco, Wash., with a $2.3 million claim.
An attorney for Overland said the company is actually a secured creditor and disputed the amount of the claim.
Joe VanLeuven, an attorney representing Rabobank, said he is still evaluating the bankruptcy effect on Rabobank’s state court action and the financial receivership for Lost Valley Farm.
A receiver was appointed to oversee the Oregon dairy’s finances and protect Rabobank’s collateral at the same time that an Oregon judge ordered the company to cooperate with the planned auction earlier this month.
VanLeuven said he would not comment on Rabobank’s disposition toward a reorganization plan for Te Velde’s companies. It is unclear what the immediate effects of the bankruptcy will be, thought the immediate impact is the automatic stay, he said.
“The upshot is our auction is not happening today,” VanLeuven said.
Riley Walter, te Velde’s lawyer based in Fresno, Calif., said the bankruptcy filing means receivership of the dairy transfers back to te Velde. Walter said they are in discussions with Rabobank to protect the bank’s interests, but he is not certain what they will decide.
Walter said Lost Valley Farm could undergo a complete reorganization or partial liquidation moving forward, but that also has not been determined.
“The debtor has the sole right to propose a plan for the first 180 days of the case,” Walter said. “As we sit here today, the decision has not been made yet what we will do going forward.”
The auctioneer, Toppenish Livestock, sent several staff members on the hundred-mile trip to Boardman to inform bidders of the latest development. Owner John Top said the company spent three weeks preparing for the auction.
“It’s the height of inconvenience,” Top said.
Aside from its financial troubles, Lost Valley Farm has repeatedly run into regulatory problems in 2018.
Unauthorized discharge of manure and other violations of its confined animal feeding operation, or CAFO, permit prompted the Oregon Department of Agriculture to fine the dairy more than $10,000.
Continued wastewater issues were cited in a lawsuit filed by ODA seeking to stop all discharges from the dairy, which would effectively shut it down. That case was settled, allowing Lost Valley Farm to continue operating under certain conditions.
A spokeswoman for ODA said regulators continue to conduct weekly inspections at the dairy. Since the March 16 court settlement, they have observed several more violations — including manure spills — at Lost Valley Farm, which were self-reported but still constitute a CAFO permit violation.
Compliance work is ongoing, the spokeswoman said, adding that no surface water or groundwater sites have been contaminated. When asked about how they are working to comply with the permit, te Velde said, “All I can tell you is we’re doing the best we can there.”
Oregon’s CAFO program permits, on average, 509 facilities and conducted 880 inspections across the state last year. All dairies, regardless of size, are visited approximately every 10 months, and less than 1 percent of inspections resulted in violations that led to civil penalties.