SASKATOON – A Manitoba pulse processor continues to struggle for sound financial footing, despite a backlog of debts.
Woodstone Foods, a Portage la Prairie food ingredient company, has seen its share of financial difficulties due mainly to the high costs of research and development. The company, which developed its own technology to produce fibres, starches and proteins from yellow field peas, is now restructuring and seeking new financing.
The news of the company’s closure and financial woes came as no surprise to Manitoba farmers.
“Every pea producer in the area knows Woodstone,” said Murray Skayman, of Hamiota, Man.
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Skayman and others in the area were owed more than $100,000 from deliveries made in the spring of 1995. They were relieved when the Canadian Grain Commission began to pay more than 40 farmers on a bond formerly held by Woodstone.
“They’ve always been late paying. Anytime you dealt with Woodstone you knew you would be waiting. This time it took too long. The bond paid us out just last week. The farmers got paid but the pulse growers (association) wasn’t so lucky with their checkoff money,” said pea producer Brent Strachen, also of Hamiota.
Manitoba Pulse Growers general manager Doug Jones confirmed the association was owed approximately $5,200 by Woodstone. He said the bond could not return the checkoff to the group because of rules guiding the payment of bond funds.
“The producers should be receiving the levies back directly from the grain commission. We would hope those producers will pass the funds back to the association.”
Jones said Woodstone has always acknowledged the debt and in the past made attempts to repay the checkoff fees it collected on delivered peas.
The company is working with a brokerage firm to secure venture capital that will allow it to continue. Company officials say their order books are full of clients but a cash flow shortage has cast doubt on the future of the enterprise.
“We have an extremely loyal customer base and that is helping us negotiate our refinancing,” said Gary Nickel, president of Woodstone.
The cash crunch closed the plant last week, sending 45 workers home.
The city of Portage la Prairie has cut off water to the company and is seeking more than $500,000 in unpaid utility bills and taxes through a tax sale notice.
Dale Lyle, director of finance for the city of Portage la Prairie, said debts to the city greatly exceed the tax sale amount.
“We want them back in business in Portage, but the bills have to be paid,” he said.
Nickel hoped a financing package would be finalized by March 16, but admitted it has been a difficult situation. To accomplish the restructuring, brokers from Wellington West have asked creditors to accept a standstill agreement on repayment until the company can reorganize.
“It can be tricky at this point. Any single creditor that doesn’t co-operate could spell trouble for the deal,” said Charlie Spiring, president of the Winnipeg broker.
Woodstone management controls all of the 15-year-old company’s common stock, with $500,000 in preferred shares held by Labatt, an Ontario firm with brewing interests.
In 1994 Woodstone issued a Manitoba government guaranteed grow bond raising $1 million. A federal government Western Economic Diversification loan agreement also remains unfulfilled for nearly $600,000.
Allegations were recently leveled in the Winnipeg media and by the Manitoba NDP that the grow bond was used to pay down debts rather than finance Woodstone plant expansion.
But a spokesperson for the Manitoba provincial government said it is satisified Woodstone used the money appropriately and government will not be recommending an investigation.
A board of directors monitored how the grow bond was spent and Woodstone was required to report any changes in its business plan to the board.
Spiring said both the province and Labatt were “bending over backwards to get a deal” but a settlement is complex because of the large number of players involved. He said the plan is to arrange between $300,000 and $500,000 in short-term cash that would be put in place prior to a $3 million long-term financing deal. The company expects to generate sales of more than $10 million in 1996.
“It’s great that the company is dealing with the situation. We need this kind of industry locally, but the producer has to get paid. We all want them to get back to buying peas. Lots of peas,” said Jones.
