Beef plant’s request for $2.25M credit line approved

Farm Forum

SIOUX FALLS – A federal bankruptcy judge has approved an idled South Dakota beef packing plant’s request for $2.25 million in credit so it can employ an investment banking firm to pursue a sale.

On Sept. 26 Judge Charles Nail approved Northern Beef Packers’ request during a hearing in Pierre.

Here is the Northern Beef Packers’ proposal on how to use the $2.25 million line of credit that was approved.

· Payroll for security workers: $99,200

· Payroll for still-employed plant workers: $261,492

· Payroll taxes: $95,740

· Building insurance and workers comp insurance: $255,953

· Health insurance: $39,964

· Allowance for higher utility deposits: $29,000

· Payment of attorneys: $405,000

· Retainer and fees for Lincoln International: $160,000

· Fees for committee’s professionals: $175,000

· Lagoon repairs: $20,000

· Various utilities: $488,801

· Total: $2,030,150

· Remaining cash on hand: $219,850

Nail previously approved the Aberdeen plant’s hiring of Lincoln International, which will seek a ”stalking horse” bid in which one potential buyer makes an initial offer to set the floor for an auction.

Northern Beef Packers opened its $109 million state-of-the-art facility on a limited basis in 2012 after years of delays. But its owners filed for Chapter 11 bankruptcy protection in July, saying they didn’t have enough money to buy cattle for slaughter.

In August, Nail denied Northern Beef’s initial request for $4.9 million in post-petition financing, prompting the company to withdraw that plan. That led a trustee to ask Nail to change the case to a Chapter 7 liquidation case to protect the interests of creditors and the estate and to prevent further delay and default. With the Sept. 26 ruling, the case remains in Chapter 11 bankruptcy, allowing the plant to oversee its sale.

After opening, Northern Beef struggled to reach anywhere near its production target of 1,500 head per day. Workers were processing about 200 head per day from April through June, but those levels didn’t generate enough cash to pay off debt or fund ordinary operations, the company said then.

Once locally owned, Northern Beef Packers is 41 percent owned by businessman Oshik Song with 69 other Korean investors who each gave at least $500,000 under the federal EB-5 program that encourages foreign investment in exchange for qualifications to secure permanent residency.

With $138.8 million in liabilities and just $79.3 million in assets, according to court documents, the plant laid off about 260 employees in July and halted production.

Northern Beef wants the auction held by Dec. 3 with the sale to close by Dec. 27.