An attorney for NORPAC Foods believes the bankrupt processor’s assets may be divided among several buyers if farm entrepreneur Frank Tiegs refuses to buy most of them.
Tiegs had planned to buy the farm cooperative’s Oregon facilities in Brooks, Salem and Stayton, as well as its plant in Quincy, Wash., for $155 million as part of the company’s debt restructuring in Chapter 11 bankruptcy.
However, shortly before competing bids were due for the assets on Oct. 18, Tiegs said he was terminating the “asset purchase agreement,” citing concerns about environmental and regulatory problems at NORPAC.
During an Oct. 28 bankruptcy court hearing in Portland, Ore., NORPAC’s attorney, Albert Kennedy, said the company’s been approached by other “potential purchasers” who’d each be willing to buy a portion of the assets that Tiegs had intended to buy.
At this point, though, NORPAC Foods and a committee representing its creditors don’t believe the termination of the “asset purchase agreement” is legally effective and want U.S. Bankruptcy Judge Peter McKittrick to approve the sale, Kennedy said.
If the dispute ends up in litigation, NORPAC doesn’t want Tiegs to present the defense that there was no contract, Kennedy said.
The company believes the “grounds for termination are baseless” and has told Tiegs the “termination notice was given in bad faith,” Kennedy said during a previous Oct. 21 court hearing.
Scott Cargill, an attorney for unsecured creditors, echoed that sentiment, characterizing those reasons as a “pretext” to “renegotiate the acquisition in light of there being no other bidders coming to the table.”
Tiegs told the Capital Press that NORPAC had problems with soil and water contamination while company executives didn’t supply him with requested documents and had deleted an internal email system.
It was a “lack of information on due diligence” that prompted the deal’s termination, Tiegs said. “If you got a turd in the skillet, you want to avoid anyone seeing it.”
An attorney for Tiegs’ Oregon Potato Co., Joseph VanLeuven, opposed the approval of the asset sale, alleging that NORPAC wanted such an order to file a lawsuit arguing the contract was binding.
While questioning Winston Mar, NORPAC’s chief restructuring officer, VanLeuven said the company hadn’t developed a federally mandated “project safety management plan” and had instead “misappropriated” one from National Frozen Foods, another processor owned by Tiegs.
“They were literally verbatim copies,” VanLeuven said of the plans, which identify ways to mitigate hazards to workers.
VanLeuven also said an environmental review had detected arsenic contamination of a well at the Quincy, Wash., facility and that NORPAC had sold off corn ahead of schedule that Tiegs had expected to buy at a discount.
McKittrick, the judge, ultimately said the court hearing wasn’t the appropriate time and place to determine whether Tiegs could validly terminate the agreement, saying that discussion was “for a different day and potentially different court.”
McKittrick said he’s also prepared to authorize the sale of NORPAC’s assets without reaching a conclusion as to whether Tiegs had legitimately terminated the deal.
NORPAC Foods has more than 1,125 full-time employees and 1,000 seasonal employees. The company’s most recent monthly operating report for August disclosed nearly $2 million in labor expenses.