Unsecured creditors of FarmPure Seeds have agreed to take a deal that may see them get back about six cents on every dollar they’re owed by the Regina firm.
Pickseed, a well-known Ontario forage seed and turfgrass company that plans to buy FarmPure Seeds’ forage and turf seed business at Nipawin, Sask., has offered those creditors a $450,000 fund which, pending court approval, would go toward unpaid debts worth as much as $7.87 million.
A preliminary list includes almost 500 potential unsecured creditors, mostly on the Prairies but including several from across Canada and the U.S. and worldwide.
Meeting Oct. 23 in Saskatoon with officials from Pickseed and FarmPure, and FarmPure’s trustee Naida Kornuta of financial services firm Meyers Norris Penny (MNP), unsecured creditors voted largely in favour of accepting Pickseed’s offer, Kornuta said.
Kornuta said in an interview Thursday that officials from Pickseed were able to provide producers and others “with a greater comfort level” about doing business with the company going forward if the Nipawin deal is approved.
Creditors, before voting, had asked about the possibility of further investigation to recover a greater percentage. But Kornuta noted that for creditors to investigate would be costly and may either turn up nothing or find money that would go first to Pickseed as FarmPure’s remaining secured creditor, before unsecured creditors could lay claim to it.
Because FarmPure was only dealing in certified seed grown under contract, none of its debts to seed growers would be covered by the sort of security that licensed grain companies would post with the Canadian Grain Commission, she said.
Some growers, Kornuta said, were able to take back the seed they delivered to the company and thus limit the amount owed to them.
With the creditors’ vote past, Kornuta must now get court approval for Pickseed’s proposal, which will be at least two weeks away because creditors must get 15 days’ notice of that court hearing.
If the proposal is approved in court, unsecured creditors would then have 30 days to submit their claims, with proof, to MNP to claim a dividend from Pickseed. MNP’s fees will also be paid out of the fund.
Depending on the number of proven claims submitted by then, Kornuta said, it’s possible that creditors may get back more than six cents on the dollar in dividends.
Under its proposal, Pickseed becomes FarmPure Seeds’ lone secured creditor by buying out the secured status of the two top secured creditors, the Royal Bank and Farm Credit Canada. That deal, pending court approval, would see RBC and FCC get back 85 per cent of the $4.1 million owed them.
Pickseed’s proposal, Kornuta said, will allow FarmPure Seeds to be sold as a “going concern” with the potential to maintain the Nipawin operations and provide “a needed facility to forage growers within the community and the province.”
FarmPure Seeds formed in the 1990s through the merger of Value Added Seeds and Performance Seeds into Quality Assured Seeds, a firm owned by about 200 pedigreed seed growers. It was renamed FarmPure Seeds in 2005.
The company owned two facilities in Manitoba: a canola processing plant at Laurier, already sold at auction, and a forage seed distribution centre at Brandon, now up for sale. The Nipawin operations came into FarmPure’s hands in 2006 when it bought Svalof Weibull’s SW Seeds division.
MNP’s review of FarmPure Seeds describes a company that undertook “rapid expansion without adequate market analysis and without the necessary managerial support and expertise to successfully manage a corporation with this diverse and complex an operation.”
FarmPure, looking to develop “profitable and sustainable value chains” for its stakeholders, formed several companies including FarmPure Foods, FarmPure Beverages, FarmPure Genetics and FarmPure Financial, dubbing them the FarmPure Family of Companies. The foods, genetics and seeds businesses, each with a separate board, are the only companies still operating, Kornuta said.
A letter from MNP to unsecured creditors said FarmPure Seeds, in its draft financial statements for the period ending Oct. 31, 2007, noted having made “significant intercompany advances” to its parent firm for investment in “affiliated companies” in the development stage. The loans to FarmPure Seeds’ parent firm and affiliates are considered “uncollectible,” Kornuta wrote.
The affiliated companies, she wrote, “had not developed sufficient sources of operating cash flow to indicate that they would be in a position to repay the amounts owing” to FarmPure Seeds.
That letter and other documents related to FarmPure Seeds are available on MNP’s website.