Ilta Grain plans sale of six pulse processors

A collection of pulse processing assets will soon hit the market.

Ilta Grain, which is under creditor protection, has received permission from the Supreme Court of British Columbia to sell some or all of its assets.

Those assets include processing plants in Saskatoon, Belle Plaine, Swift Current, Cut Knife and two in North Battleford.

The property, processing plants and equipment have a book value of $173 million.

The Belle Plaine plant will not be part of the court-approved sale and investment solicitation process because Ilta has already received a non-binding offer to buy that facility and it intends to follow through on that deal.

There is speculation about who might be lining up to buy the Ilta assets.

Vivek Agrawal, director of JLV Agro, an Indian commodity brokerage firm, thinks Viterra or Agrocorp Processing may be possible suitors.

“But it’s totally a wild guess,” he said in an email.

Agrawal said competing pulse companies are all hurting because margins are thin due to “huge competition” and a shrinking market caused by India’s import duties and quotas.

“As per my knowledge, every single company from Canada is facing difficulties,” he said.

Mike Jubinville, an analyst with MarketsFarm, said AGT Food and Ingredients might be a player but he agreed that all pulse merchandizers have struggled for the past couple of years.

“Who is in a position to be able to make a significant investment even if it’s pennies on the dollar?” he said.

“It’s hard to say. It may be one of the major line companies that look at this as an opportunity to invest.”

PricewaterhouseCoopers Inc., which has been appointed as the monitor of Ilta Grain, has set a target of Aug. 26 for non-binding offers on the assets.

The offers will be reviewed by Ilta Grain, the monitor, secured lenders and Origin Merchant Partners, an investment banking firm leading the sales process.

Qualifying bidders will be asked to submit binding offers by Sept. 30 and if Ilta accepts one or more offers, the monitor will seek court approval for the transaction by Oct. 15.

Ilta Grain owes $149 million to about 450 creditors, including hundreds of farmers who have delivered grain to the facility and have not been paid.

Its two primary secured creditors are HSBC Bank Canada and Farm Credit Canada. It owes $47.5 million to HSBC and $86.5 million to FCC.

FCC has agreed to lend the company a further $8 million, which will allow it to operate to the end of the year.

On July 9, one day after the company received creditor protection from the court, it received a notice from the insurance company Atradius that it was canceling Ilta’s insurance policy.

That prompted the Canadian Grain Commission to pull Ilta’s grain dealer licence because the policy was Ilta’s financial security to be used in case of insolvency.

The monitor said the cancelation by Atradius violated the stay of the exercise of all rights and remedies against the company contained in the July 8 court order.

The monitor asked the court to order Atradius to reinstate the insurance policy. The court did not approve that request.

It also asked for and received from the court expanded powers in relation to the operation of Ilta.

In its first report to the court, the monitor said that it has become clear that some of Ilta’s management team opposes selling the company’s assets.

“As a result of their lack of support for the company’s current strategic direction, certain employees have exhibited behavior and taken steps that are not aligned with the objectives of these CCAA (Companies’ Creditors Arrangement Act) proceedings,” stated the monitor in the report.

The monitor said certain employees are taking actions without prior approval from the monitor and those actions are not in keeping with the terms of the initial court order.

As a result, the court has given the monitor the power to approve any payment in excess of $500.

It also now has the ability to make recommendations to Ilta’s board of directors about which employees should be fired.

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