Grain company owes farmers $6.5 million: lender

According to an affidavit filed by ATB Financial, the company's primary lender, farmers are owed $6.5 million for unpaid inventory. | Screencap via wagrain.ca

W.A. Grain & Pulse Solutions has been placed under receivership while owing farmers millions of dollars.

A spokesperson for the Canadian Grain Commission said he is unable to reveal the amount of grower liability.

“We can’t disclose that at this point because we’re still conducting an audit of the situation, so we don’t have an accurate portrait of total outstanding liabilities to producers yet,” said Remi Gosselin.

“Those are the rules of the program.”

However, according to an affidavit filed by ATB Financial, the company’s primary lender, farmers are owed $6.5 million for unpaid inventory.

Gosselin would not confirm that amount and said the commission has yet to determine what portion of outstanding liabilities would be eligible under the Safeguards for Grain Farmers Program.

He did say the grain commission has security in place worth $4 million for W.A. Grain, and there is also an unspecified amount of grain inventory that can still be sold and used to reimburse farmers.

The commission suspended the license of W.A. Grain on April 20 and then reinstated it with conditions May 1 at the behest of BDO Canada Ltd., which was appointed as the receiver of the company April 26 by The Court of Queen’s Bench of Alberta.

“If they sell grain in inventory, they need to put that in an account for the purpose of settling outstanding liabilities for producers,” said Gosselin.

The problems for W.A. Grain date back to the summer of 2018, according to ATB’s affidavit.

The lender said it began monitoring the company’s loans in June of that year because of poor financial performance stemming from “low gross margins, tight liquidity and high leverage.”

W.A. Grain is a pulse processor with facilities at Pambrun, Sask., Ponteix, Sask., Vanguard, Sask., Bashaw, Alta., Bowden, Alta., and Slemon Park, P.E.I.

In order to improve its financial performance, W.A. Grain embarked on a cost cutting and revenue diversification strategy.

It started to focus on organic pulses, shipping product directly to China, and established the plant in Prince Edward Island along with a pet food division at its Bowden facility.

ATB continued to closely monitor the firm, and on Sept. 24, 2020, it organized a meeting with company officials to discuss selling off assets to reduce debt.

The plan was to sell the pet food division by December 2020 and the Bowden export facility by April 2021.

It became apparent that without the sale of the pet food division, W.A. Grain would be unable to meet its payment obligations to farmers.

However, the sale could not proceed because of a dispute between ATB and another lender, Avrio, on how the assets would be divvied up.

In January 2021, W.A. Grain provided ATB with draft year-end financial statements showing significant unrealized foreign exchange hedging losses because of rapid depreciation of the Canadian dollar associated with the COVID-19 pandemic.

Those hedging losses amounted to $7.6 million plus another US$1.5 million.

W.A. Grain had $11.85 million of debt with ATB as of March 26, 2021. It owed another $8 million to Avrio.

ATB sent a demand letter calling for repayment of its loans March 29.

By April 20, the company had reached the maximum limit of its $7 million operating line of credit and was operating solely on accounts receivable collections.

“The operating line is maxed out and the lender is no longer prepared to continue funding the debtors’ operating costs,” ATB stated in its affidavit.

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