Some Manitoba farmers who sold grain to Puratone, before the hog production company entered creditor protection in September, are considering a lawsuit because they haven’t received payment for their grain.
In late November, Maple Leaf Foods announced it would spend $42 million to buy Puratone, a company based in Niverville, Man., that produces 500,000 hogs annually.
A few producers in Manitoba have suggested that Maple Leaf should compensate farmers who delivered grain to Puratone and were never paid. But a Maple Leaf spokesperson said the company bought Puratone’s assets, which means Maple Leaf isn’t responsible for Puratone’s liabilities.
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According to the Canadian regulations, when a corporation buys the shares of another company the buyer usually assumes the liabilities of the purchased company, including outstanding debt. Since Maple Leaf purchased Puratone’s 50 hog barns, three feed mills and other assets, it isn’t on the hook for Puratone’s substantial liabilities.
A list of the company’s creditors, which is available online, indicates that Puratone owes $40.8 million to the Bank of Montreal, $40.2 million to Farm Credit Canada and $5 million to Manitoba Agricultural Services Corp.
Puratone also owes money to scores of companies throughout the province, including $122,000 to Manitoba Hydro and $142,000 to Landmark Feeds.
Farmers are particularly affected. Puratone owes anywhere from $30,000 to $150,000 to dozens of Manitoba farmers who delivered grain to the company this year.
For instance, John Sigurdson of Riverton, Man., is out more than $60,000 after delivering grain to Puratone late this summer.
“As it stands right now… we are looking for a lawyer that works in bankruptcy and insolvency,” Sigurdson said. “As soon as your grain got there (Puratone) it was made into feed and away it went…. It’s basically theft to me.”
A monitor, Deloitte and Touche, is overseeing the Puratone creditor protection process. Farmers, including Sigurdson, are trying to get their status as unsecured creditors changed so they have a chance of recovering their losses.
Sigurdson is frustrated that Puratone entered creditor protection rather than filing for bankruptcy. If the company had gone bankrupt, affected grain farmers would have been able to recoup their losses because a clause in the federal Bankruptcy and Insolvency Act protects farmers and fisherman, he said.
“I know that according to the act, it says that a farmer who has delivered grain there within 15 days of the time they go into bankruptcy, they become a secured creditor and they go to the top of the list.”
The clause, section 81.2 in the Act, does provide special rights for farmers, said Vic Kroeger, director of corporate recovery Western Canada for MNP in Calgary.
There are, though, provisions in the clause that make it tricky for farmers to recover their loss.
“There is a right that they can get back the grain that is still remaining, from what they delivered,” he said.
In other words a farmer can get the grain back, assuming the company still has it.
In this case the grain is likely gone because it was probably fed to Puratone pigs.
