Ilta’s assets are being sold after company filed for creditor protection due to $150 million in outstanding debts
The fire sale is officially underway at Ilta Grain, a Surrey-based grain processing and export company that had outstanding debts of nearly $150 million when it filed for creditor protection earlier this year.
Viterra announced last week that it has signed a purchase agreement to acquire Ilta’s grain processing facility at Belle Plaine, Sask., about 40 kilometres west of Regina on the Trans-Canada Highway.
Financial details of the deal were not disclosed.
Ilta went into creditor protection in early July, leaving creditors and farmer clients on the hook for nearly C$148 million and more than US$500,000.
The company’s assets, which include grain handling and processing facilities in Saskatchewan and Manitoba, are being liquidated as part of a court-ordered settlement process aimed at meeting a portion of the company’s outstanding debt obligations.
Viterra’s agreement to purchase Ilta’s Belle Plaine facility is subject to customary closing conditions, including court approval at a hearing that was scheduled for Aug. 23.
Pending court approval and the removal of other conditions, the acquisition was expected to close Aug. 27, Viterra said in an Aug. 20 news release.
Ilta’s financial trouble is a bitter pill to swallow for creditors, which include hundreds of prairie farmers who collectively were owed roughly $14 million, according to the company.
All told, more than 475 financial claims have been registered in the legal process.
The largest secured creditors include Farm Credit Canada ($86.5 million) and HSBC Bank Canada and Export Development Bank Canada ($47.5 million).
The Canadian Grain Commission said Aug. 22 it is unclear how much money was owed to farmers by Ilta, adding that claims are still being received.
It will take “several weeks and months” before the claims process is concluded and cheques are issued to growers, CGC officials added.
A creditor list compiled by bankruptcy monitor PWC Canada suggests that one Saskatchewan-based farm was owed more than $1.3 million.
As many as 20 others were owed $100,000 to $250,000 each.
Earlier this month, the grain commission announced the creation of a special escrow account to hold equity that could potentially be used to reimburse farmers who delivered grain to Ilta but didn’t receive payment.
Commission spokesperson Remi Gosselin said the value of the escrow account is $2.9 million.
Under security provisions enforced by the grain commission, Ilta posted additional security valued at $12 million.
That security is in the form of an insurance payables policy provided by Atradius.
It remains to be seen how much of the $2.9 million in escrow and the $12 million in potential insurance payouts will end up in the pockets of farmers.
“The escrow account was created and the court appointed monitor put some funds aside that represented the value of the grain in the (Ilta grain) inventory that still belonged to producers,” Gosselin said.
“That is to say, grain for which primary elevator receipts were issued but for which payment (to producers) was not made.”
Gosselin said provisions in the Canada Grain Act suggest that a portion of Ilta’s grain inventory may still belong to producers, adding that ownership of the grain is “in question.”
“We’re setting that (equity) aside for negotiation at a later date,” Gosselin said.
“It’s going to be negotiated between secured creditors and the Canadian Grain Commission.”
In the meantime, some affected farmers are aiming their frustration at the grain commission, whose Safeguards for Grain Farmers Program is designed to protect primary producers from financial losses.
Licensed grain companies are required to post security that can be used to protect farmers against financial losses.
The commission determines the value of the security that is posted based on grain inventory and sales history.
When asked if it’s unusual for a grain company with outstanding debts of $150 million to post security in the form of a $12 million insurance policy, Gosselin declined to respond, saying he was not qualified to answer.
According to Viterra, the Belle Plaine facility handles a wide range of pulses and other crops and provides added value through precision cleaning and conveyance equipment that prepares bulk commodities for export.
It can ship finished products by containers, bags, intermodal, truck and bulk rail shipments.
The facility has total storage capacity of 22,000 tonnes and has a looped rail track capable of handling 135-car trains.
The facility has been operational since the fall of 2017.
Viterra officials declined to speak with The Western Producer last week, saying the company does not have any additional information to share, other than what was provided in its Aug. 20 news release.