Operations continue | The company intends to have plans for creditors in place in 90 to 120 days
Mustard Capital Inc. is restructuring under court supervision and with the help of interim financing from a Swiss lender.
It remains operating as usual during the process.
A Queen’s Bench justice in Saskatoon last week authorized the Gravelbourg, Sask.-based company to borrow $250,000 from Granosa AG of Switzerland to fund ongoing operations and develop a plan for the company’s creditors.
MCI’s chief executive officer Tom Halpenny said a recent expansion put the company in trouble.
“We encountered some delays and some cost overruns associated with that,” he said.
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“That, combined with some market events with volatility in the preceding couple of years with mustard prices and contracts as they relate to market events, conspired to have us in a cash challenged position.”
The board evaluated options and took action, he said.
At the same time, the company’s licence under the Canadian Grain Commission was up for renewal.
Halpenny said the company is temporarily de-licensed but has security in place as authorized by the court.
“We’re looking to co-operate with a separate licencee from the grain commission to assist us in the direct purchase of grain from farmers,” he said, adding those arrangements are still being finalized.
Farmers who had delivered before Jan. 31 are covered by the licence that was in place at that time.
MCI opened in 2007 and immediately faced challenges, including escalating mustard prices and competition from European buyers for a smaller crop.
It cleans, processes and mills mustard into ingredients for markets around the world.
A $1.3 million expansion and construction project at Vanguard, Sask., was announced in 2010. Halpenny said the expansion wasn’t a mistake and many projects face the challenge of being on time and on budget.
He said the value-added industry is competitive and operating while undercapitalized became a problem. Support from customers and farmers remains strong.
“That’s what gives us confidence that we’ll retool the company and emerge as a stronger company.”
There are currently 18 employees.
Halpenny added that within 90 to 120 days, the company should have a restructuring plan in place and be out of the court process.
Court documents list all property and assets of MCI subject to a charge in favour of Granosa AG to secure repayment. Ernst & Young, the trustee, and MacPherson, Leslie & Tyerman, legal counsel to MCI, are also priority secured creditors.
Farmers who delivered after Jan. 27 are secured through a $50,000 charge against the property and assets.
