Buyer seen for Simply Essentials facility in Charles City by early August

By Bob Steenson, bsteenson@charlescitypress.com

Simply Essentials on Charles City’s Main Street could be purchased within the next six weeks, likely by a buyer intending to reopen it as a chicken-processing plant.

The trustee in the Simply Essentials Chapter 7 bankruptcy case filed notice this week of his intent to sell the property for $9.5 million to a company called Pure Prairie Farms Inc., and a hearing was set for July 16 for the bankruptcy court to consider the sale.

The trustee, attorney Larry Eide of Mason City, said his understanding is that Pure Prairie Farms includes growers who had been under contract with Simply Essentials to supply chickens to the plant.

But Eide said he also received an “overbid,” of $10 million from Wincorp International, after he had accepted the Pure Prairie Farms offer.

On Tuesday, Eide filed a “motion to sell and for other relief … and motion to approve bid procedures,” in U.S. Bankruptcy Court for the Northern District of Iowa.

“As of May 17, 2021, multiple bids were received … for the property as a whole and as a so-called ‘turnkey’ operation,” Eide wrote in his motion. “The Trustee concluded that the bid of Pure Prairie Farms Inc. was the highest and best offer, and the Trustee accepted that bid in writing.”

He wrote that after that date he received the offer of $10 million from Wincorp International, which is owned by Jamaica Broilers Group Ltd., and which does business in the United States as The Best Dressed Chicken Inc.

Eide told the Press it is likely that Wincorp and possibly others will file objections to the sale to Pure Prairie Farms.

“I suspect that that person will object to the motion on the basis that they’re going to pay more, and I suspect the judge will tell me, if history follows, he will tell me to entertain higher bids, and I have already set up the process,” Eide said.

“On the 6th (business) day after, which will likely be Monday, July 26, I will have a telephone conference with everybody who wants to buy, and I will determine who the new buyer is, if there is a new buyer, and I will file a report with the court and the hearing in Cedar Rapids will be on Aug. 3,” he said.

At that Aug. 3 hearing or shortly thereafter the bankruptcy judge could approve the sale of the plant.

The property for sale includes 3.1 acres at 901 N. Main St., where the Simply Essentials processing plant and offices are located, and 9.7 acres of property at 300 Lawler St., the location of a parking lot and live barn.

In addition, the sale would include “a 140-bird-per-minute CO2 stun, kill, scald, pick line, certain packaging and related equipment, and certain office equipment,” and “various trademarks, website domain and other intellectual and intangible property which were owned and/or used by the Debtor in the operation of its business.”

The assets would be sold “free and clear of all liens, claims, titles, encumbrances, interests, and rights.”

Eide said it is not unusual for higher bids to be received after an offer has been accepted by a bankruptcy trustee.

“I’ve had overbids on even what you might consider to be insignificant type property,” he said. “It’s not totally unusual. This is a little bit of a unique type deal, but not entirely.”

Eide said it was important for him to sell the property as a “turnkey” operation, that could be reopened as an operating business.

That’s important to the community, he said, but as a bankruptcy trustee his first concern is the price he can get so the money can be used to repay creditors.

“It was clear to me that the sum of the parts — the entity as it existed — was worth more than the bits and pieces. If somebody were to come in and tear the thing apart and sell it piece by piece, it would have brought way less,” Eide said.

“I toured the plant. It’s set up exactly for what it was used for, and if you ripped all that equipment out of there and sold it, it wouldn’t be worth anywhere near that, I don’t believe, anyway,” he said.

Even if the property is sold for $10 million or slightly more, that’s far less than what creditors say they are owed by Simply Essentials.

The principal secured debt is a first mortgage held by the Federal Agriculture Mortgage Corp., known as Farmer Mac, for more than $18 million. Pitman Farms Inc. holds a second mortgage on the parking lot and live barn for almost $5 million.

Pitman Farms, of Sangor, California, is the company that purchased Simply Essentials in 2017 and that closed the plant Aug. 5, 2019, putting more than 500 employees out of work.

According to Eide’s motions filed in bankruptcy court, Farmer Mac and Pitman Farms have agreed to divide the gross sales proceeds, with Farmer Mac receiving 96% and Pitman Farms receiving 4%. They have also agreed that any property tax due on the property will be paid out of the gross proceeds, as well as the compensation to the broker and agent who were hired to help with the sale.

They have also agreed to hold back 0.75% of the gross proceeds for the trustee. If the property is sold for $10 million, that would be $75,000 for other creditors.

“Not a lot of money, but it’s better than tearing it apart,” Eide said. In addition, “rolling stock” including a dozen or more semi-trailers are being sold separately, and Eide said he has recovered “a little bit of other money,” that will be available to distribute to unsecured creditors.

If an auction is held for the property on July 26, the bidding will start at Pure Prairie Farm’s bid of $9.5 million and the next bid will need to be at least $200,000 higher, Eide outlined in his motion. Subsequent bids would each need to be at least $100,000 higher.

Bidders will need to put down an initial deposit of $500,000, which will be refunded to unsuccessful bidders. The winning buyer will need to pay the balance of the purchase price at the closing, which will take place 20 days after the bankruptcy court approves the sale.