Saskatchewan growers who supplied a dry mustard milling firm in the province’s southwest will get what they’re owed, while the company’s fate is to be decided by the end of next week.
The Canadian Grain Commission on Monday announced growers who delivered to Mustard Capital Inc. (MCI) at Gravelbourg, Sask., up until the end of October 2011 will get "100 per cent compensation" for payments they were owed, through the CGC’s payment protection program.
The company, which had been in the process of expanding its business through a second facility at Vanguard, Sask., was a CGC-licensed grain dealer up until Feb. 1, 2012.
According to CGC chief commissioner Elwin Hermanson, growers who hadn’t been paid for deliveries 90 days before MCI lost its license were eligible to submit claims for compensation.
MCI announced Feb. 2 it would seek financial reorganization and debt restructuring. At the time it cited a "combination of expansion cost overruns and operational losses from delayed development" of the site at Vanguard, about 55 km west of Gravelbourg.
The company said it would continue "business as usual" in the meantime, providing security to farmers either by dealing with another CGC licensee or by paying cash for purchases.
According to an April 5 affidavit from company CEO Tom Halpenny, MCI got $250,000 in court-approved interim financing in February from one of its customers, Granosa AG — and since then MCI has "operated at a profit."
MCI, he said, expects to be able to pay back the Granosa financing in full by the end of this month.
However, he said, since February, MCI hasn’t come up with "any reasonable offers" from any interested party to buy, restructure or recapitalize the business, and the prospects of a new proposal for its creditors "have grown more remote."
MCI on April 11 was granted approval of an extension that will allow it to continue operating until May 4.
In that time, MCI expects to collect on outstanding accounts, fulfill contracts and convert inventory, give its employees appropriate notice and allow for "orderly and cost-effective" sale of its assets after that date if no other offers are brought forward.
However, the extension order, granted by a Queen’s Bench judge in Saskatoon, allows the Bank of Nova Scotia, one of MCI’s creditors, to apply to the same court for appointment of a receiver on Monday (April 23) at the earliest.
"New and novel"
MCI, which at its peak was sourcing crops from about 250 Saskatchewan mustard growers, went into expansion mode in 2010, having developed a milling process it described as "unique to the Canadian marketplace."
Its Gravelbourg plant made yellow, oriental and brown mustard ingredients, mainly for use in prepared mustards, flavour enhancers, binders and extenders. At Vanguard it planned to process "new and novel" products such as a "de-oiled and de-heated" yellow mustard.
The ill-fated expansion to Vanguard got $300,000 in funding in February 2010 through the federal Community Adjustment Fund (CAF), followed by $655,000 in repayable federal support from the federal Agri-Opportunities program in April that year.
MCI, at that time, said it would invest $1 million of its own capital into the Vanguard site.