Select Onion has debts of $65 million to $85 million
By MATEUSZ PERKOWSKI
The assets of a bankrupt onion farming and processing company in Eastern Oregon will be sold to repay creditors, according to the trustee.
Select Onion Co.'s 8,500 acres of farmland, water rights and processing plant in Ontario, Ore., are expected to be sold to the highest bidder by the end of August.
In April, Select Onion filed for Chapter 11 bankruptcy protection, which typically allows companies to remain operational while developing a plan to repay creditors.
In this case, however, the bankruptcy court denied a request by Select Onion's owners to use cash that had served as collateral for debt. The decision effectively shut down the processing facility due to a lack of funds.
At the request of creditors, the court appointed a Chapter 11 trustee -- turnaround expert John Davidson -- to take control of the company and prevent its onion inventory from rotting.
Displacing a company's management with such a trustee is considered an extreme measure in such bankruptcy proceedings.
The decision was made after the company's president, Farrell Larson, said he was "ready to hand over the keys and leave the operation regardless of the debtor's fiduciary duty," according to a court document.
In May, the bankruptcy judge overseeing the case granted Davidson's request to sell the company's fresh and processed onion inventories.
Davidson did not have the resources to continue running the onion company while developing a plan for reorganization, so he later asked for the court's permission to sell the firm's assets, according to a court filing.
The court has approved that motion, so Davidson is now hoping to find a buyer who can resume the company's operations, according to court documents.
Since taking over as trustee, Davidson has solicited interest from more than 20 qualified bidders and has identified others who may want to buy the assets, according to a court filing.
Select Onion owes creditors about $65 million to $85 million, Davidson said. He would not comment about how much money the asset sale is expected to raise for creditors.
An auction is scheduled for Aug. 27 at a law firm in Boise, Idaho, but it's possible that a previously submitted bid may be so significant as to render the auction unnecessary, Davidson said.
The sale of Select Onion's assets is bound to draw interest due to the healthy onion market, said Reid Saito, an onion grower in Malheur County, Ore. But few companies that can operate a facility of that size, he said.
Select Onion grew much of its own onion supply in the region, so its closure hasn't hurt local farmers, Saito said. "As far as I can tell, it hasn't affected markets here."
Unless the company that takes over the facility grows onions, it may have a difficult time getting started so late in the season because most of the crop has already been spoken for, said Bob Komoto, general manager of the Ontario Produce Co. in Ontario, Ore.
"You've got to find a supply before you can turn the plant on," he said.