PORTLAND — Several objections to the sale procedures for the bankrupt NORPAC cooperative’s food processing assets were dropped at a court hearing Sept. 24, while others await further deliberation.
The Oregon farmers’ cooperative is restructuring its debt as part of a Chapter 11 bankruptcy case and plans to sell the bulk of its assets for $155 million to agribusiness entrepreneur Frank Tiegs.
As part of the proceedings, NORPAC must obtain the bankruptcy court’s approval of the sale procedures, but several creditors and the federal government have objected to aspects of that plan.
At the Sept. 24 hearing in Portland, attorneys for several parties involved in the case told U.S. Bankruptcy Judge Peter McKittrick that they’ve resolved objections to those procedures and expect to soon submit an order for him to approve.
The details of those agreements weren’t discussed in detail during the court hearing, but some of the objections pertained to the payment of farmers’ liens for vegetables delivered to the processor before it filed for bankruptcy.
A resolution to other objections — such as the federal government’s opposition to a potential $2 million “breakup fee” if the planned sale is canceled — were put off until later in the bankruptcy process.
The U.S. Trustee’s Office, which oversees bankruptcy cases to ensure they adhere to federal statutes, has questioned whether the potential $2 million breakup fee to Tiegs’ Oregon Potato Co. was necessary.
“A breakup fee should not be a windfall and should represent a reimbursement of actual costs and expenses incurred by the stalking horse in formulating its offer or in facilitating the bid process,” the U.S. Trustee’s Office said in a court filing.
The government argued the $2 million fee won’t result in the “assets selling in excess of the market value” because the $155 million “opening purchase price is significantly less than the values” of NORPAC’s assets as described in court filings.
According to NORPAC’s recently filed summary of assets and liabilities, the cooperative owes about $165 million in debt and owns property worth more than $315 million.
McKittrick said that he’d limit the size of the breakup fee to no more than $2 million but said it’s not the right time to rule whether that’s an appropriate amount, to which an attorney for the government agreed.
The U.S. Trustee’s Office had also objected to NORPAC continuing quarterly payments of $125,000 to the cooperative’s CEO, Shawn Campbell, since he could be retained at an “hourly rate for post-petition services.”
A hearing on the government’s objection to his pay was postponed until Oct. 7, as was a hearing on the Oregon Department of Consumer and Business Services’ complaint that NORPAC had defaulted on its obligation to provide workers’ compensation insurance.
According to NORPAC’s request to sell its assets, the cooperative has “experienced significant operating losses” since 2015.
In its recent statement of financial affairs, the company said its total revenues fell more than $22 million during its 2019 fiscal year, to $352.7 million. So far in its 2020 fiscal year, which began in April, the company has earned $123.8 million in revenues.
In 2017, NORPAC sold its canning business to Seneca Foods.