Debts totalling more than $25 million have forced Natural Valley Farms into receivership.
The Saskatchewan horse slaughter and processing facilities at Neudorf and Wolseley continue to operate, but under a lease agreement with Belgium-based Velda, which has been in the international horse meat business for more than 50 years.
The lease was established in mid-August, more than a month before a judge appointed Clark Sullivan of Regina’s Sullivan Associates as the receiver.
Sullivan said the six-month lease allows Velda to keep the plant open and gives him time to sort out and resolve Natural Valley’s financial affairs.
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He said he will spend the next few weeks organizing material and seeking proposals for either new money to restructure the company or an outright purchase.
The process is likely to take months.
“The best case is to be in court before Christmas,” Sullivan said.
Natural Valley opened three years ago to slaughter and process natural beef. However, the company did not generate enough cash flow.
“Natural Valley was never able to achieve a viable or profitable level of processing and sales operations, and its financial difficulties became more and more acute and Natural Valley began to fall further and further behind in dealing with its operating and construction payables,” says an affidavit from Farm Credit Canada account manager Gary Stooshinoff filed in Regina.
FCC and Conexus Credit Union are the two lead secured creditors. FCC initiated the receivership process as the first mortgage holder. The plant’s builder, Domco, was never paid and also holds a mortgage.
“These three are owed close to $15 million,” Sullivan said.
Between $7 and $8 million in unsecured debt is also outstanding, including payments to subcontractors and trade creditors.
Sullivan said many producers who shipped cattle to the plant were never paid. Court documents show outstanding cattle and feed purchases of about $4.7 million.
Other documents show the current lease is generating about $75,000 per month, which is held in trust.
An affidavit filed by Henry Skjerven of Wynyard, Sask., the only director of the Natural Valley board who didn’t resign this past summer, said the company is also expecting at least $2.7 million from the federal-provincial specified risk management program.
Sullivan said the situation at Natural Valley is a signal of how difficult the meat industry is in Canada.
“A lot of people extended a lot of credit to this company to make it work,” he said.
Still, setting up a slaughter and processing facility is expensive and he said it is easy to underestimate the inevitable start-up operating losses.
Velda is a potential buyer.
“We’re hoping he’s (Velda owner Luc Van Damme) one of the targeted people,” Sullivan said.
The horse slaughter operation at Neudorf drew media attention earlier this year when hidden-camera footage suggested inhumane treatment of horses. Natural Valley has said it follows regulations.
