REGINA — A U.S. district court judge last week approved the receiver’s motion to sell three hog companies owned by Alberta-based Sunterra Group to the Pork Group Inc.
Tyson Foods Inc. owns the Pork Group and offered $15 million in cash to buy all the hogs owned by Sunterra Farms Iowa, Inc. and all rolling stock, and said it would accept the current barn leases. The company also said it would offer to employ all the Sunterra employees working in the barns.
PVC Management, also known as Pipestone Management, has been in charge of operations at three companies associated with Sunterra since a court order in April. The other two are Sunwold Farms Inc. and Lariagra Farms South LLC. In mid-May, PVC requested an expedited sale and the case was heard over two days in a Sioux Falls, South Dakota, court room.
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The three companies are at the centre of an alleged cheque-kiting scheme by Sunterra ownership. Compeer Financial, an American lender, claimed Sunterra wrote millions of dollars worth of cheques back and forth between the companies’ and Compeer accounts, leaving it out about $36 million on loans of $11.5 million.
When Compeer took the matter to court and asked for a receiver, PVC was appointed to look after the care and feeding of about 110,000 hogs that served as collateral for the loans.
At the same time, Sunterra filed for bankruptcy protection in Canada.
It also filed counterclaims in the U.S. dispute, saying Compeer knew about the financial operations and participated in structuring the transactions.
Sunterra said the actions were transparent and within the scope of operational agreements.
In her affidavit supporting the sale, PVC president Hannah Walkes said other companies were interested in buying the assets, but not all of them.
“Most parties were interested in filling the space at some of the barns or wanted to purchase the pig inventory at a discount to projected cash flow,” the affidavit said.
Walkes said selling the assets as a single package, including barn leases, management teams and inventory “preserves the biosecurity advantages inherent to the existing operational structure.”
She also said it ensured barn owners were in the same economic position as before, with a continued and uninterrupted supply of pigs and rental income.
Time was of the essence, she said, because markets are volatile.
“A market reduction or a disease challenge could greatly reduce the value of the pigs while the pigs are under the receiver’s care,” Walkes said.
She also said some of the barn owners who had leased to the Sunterra companies had started to refuse additional pigs because of the uncertainty.
Her affidavit said Compeer supported the sale.
Meanwhile, in Canada, a court ordered a stay of any proceedings against Sunterra until July 31 under the Companies Creditors’ Arrangement Act while it tries to restructure and remain in business. Secured creditors include Farm Credit Canada and National Bank of Canada.
NBC is involved in the U.S. proceedings in that it froze Sunterra accounts in March as the Compeer claims were made.
Sunterra Canadian facilities, including its retail groceries, remain open.
Contact karen.briere@producer.com
